As filed with the Securities and Exchange Commission on June 21, 2000
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [X]
Registration No. 333-20177
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [X]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Registration No. 811-08655
Amendment No. 6 [ ]
QUESTAR FUNDS, INC. -- IMPERIAL FINANCIAL SERVICES FUND
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(Exact Name of Registrant as Specified in Declaration of Trust)
THE HAUPPAUGE CORPORATE CENTER
150 MOTOR PARKWAY
HAUPPAUGE, NEW YORK 11788
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(Address of Principal Executive Offices) (Zip Code)
(631) 951-0500
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Registrant's Telephone Number, Including Area Code:
Copies to:
MICHAEL MIOLA THOMAS R. WESTLE, ESQ.
QUESTAR FUNDS, INC. SPITZER & FELDMAN P.C.,
THE HAUPPAUGE CORPORATE CENTER 405 PARK AVENUE
150 MOTOR PARKWAY NEW YORK NEW YORK 10022
HAUPPAUGE, NEW YORK 11788
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[X] immediately upon filing pursuant to paragraph(b)
[ ] on (date) pursuant to paragraph(b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Pursuant to Rule 24f-2 of the Investment Company Act of 1940, Registrant hereby
declares that an indefinite number of shares of the Trust are being registered
under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
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<PAGE>
I M P E R I A L
F I N A N C I A L S E R V I C E S
F U N D
A SERIES OF
QUESTAR FUNDS, INC.
PROSPECTUS DATED APRIL 15, 2000
RETIREMENT PLANNING COMPANY OF NEW ENGLAND
(THE "ADVISER")
Imperial Financial Services Fund (the "Fund") is a series of Questar Funds, Inc.
(the "Company"), a Maryland corporation. The investment objectives of the Fund
are to provide shareholders with long-term capital appreciation with income as a
secondary objective by investing in a diversified portfolio consisting primarily
of the equity securities of financial services companies that are believed by
the Adviser to offer superior prospects for long-term growth.
The Fund is sold subject to an initial sales load of up to 4.75% and has adopted
a distribution and service plan under which it pays distribution fees equal to
0.50% of its average daily net assets which includes shareholder servicing fees
equal to 0.25% of its average daily net assets.
This Prospectus, dated April 15, 2000, concisely describes the information about
the Fund that you ought to know before investing. Please read it carefully
before investing and retain it for future reference. A Statement of Additional
Information ("SAI") about the Fund, dated April 15, 2000, is available free of
charge. The address of the Company is Questar Funds, Inc., The Hauppauge
Corporate Center, 150 Motor Parkway, Hauppauge, New York 11788 or telephone
(877) 732-7696. The SAI has been filed with the Securities and Exchange
Commission and is incorporated in its entirety by reference in this Prospectus.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
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Risk/Return Summary.........................................................1
Performance.................................................................2
Fees and Expenses of the Fund...............................................2
Investment Objectives, Principal Investment Strategies and Risks............3
Management, Organization and Capital Structure..............................7
How to Purchase Shares of the Fund.........................................10
Sale Loads.................................................................13
Distribution and Service Plan..............................................15
How to Redeem Shares of the Fund...........................................16
Shareholder Services ......................................................18
Dividends and Distributions ...............................................19
Valuation of Shares........................................................20
Tax Status.................................................................20
Performance Comparisons....................................................20
Custodian, Transfer Agent and Dividend Disbursing Agent....................21
Counsel and Independent Auditors...........................................21
For More Information................................................Back Page
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RISK/RETURN SUMMARY
PRINCIPAL INVESTMENT OBJECTIVES OF THE FUND
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The Fund seeks to provide investors with long-term capital appreciation with
income as a secondary objective.
PRINCIPAL INVESTMENT STRATEGIES OF THE FUND
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Achieve the investment objective by investing at least 65% of its total assets
in primarily in common and preferred stocks, convertible securities, warrants
and options on equities of financial services companies such as commercial
banks, savings and loans associations, and consumer and industrial financial
services companies that are believed by the Adviser to offer superior prospects
for long-term growth.
The Adviser intends to focus on financial services companies with long histories
of profitability, low price to earnings ratios, strong revenue, and earnings
and/or dividend records.
PRINCIPAL RISKS OF INVESTING IN THE FUND
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-- RISK OF LOSS. The loss of money is a risk of investing in this Fund
-- MARKET RISK. The net asset value of this Fund will fluctuate based on changes
in the value of the securities in which the Fund invests. Market prices of these
securities may be adversely affected by an issuer's having experienced losses or
by the lack of earnings or the issuer's failure to meet the market's
expectations with respect to new products or services, or even by factors wholly
unrelated to the value or condition of the issuer.
-- CONCENTRATION IN THE FINANCIAL SERVICES INDUSTRY. Concentration of the Fund's
assets in the financial services industry may expose the Fund to increased risk
of loss if the market value of securities in the financial services industry
decline. Further, economic, legislative or regulatory developments may occur
which significantly affect the entire industry and thus may subject the Fund to
greater market fluctuations than a fund that does not concentrate in the
financial services industry.
CHANGES IN INTEREST RATES. Unstable interest rates can have a disproportionate
effect on the financial services industry. When interest rates fall or economic
conditions deteriorate, the stocks of financial services companies often suffer
greater losses than other stocks. Rising interest rates can cut into profits by
reducing the difference between these companies' borrowing and lending rates.
Also, market prices of debt securities held by the Fund that are convertible
into equity securities may decline due to an increase in interest rates.
CONCENTRATION OF LOANS. Banks whose securities the Fund purchases may themselves
have concentrated portfolios, such as a high level of loans to real estate
developers, which makes them vulnerable to economic conditions that affect that
industry.
COMPETITION. The financial services industry has become increasingly
competitive.
OPTION STRATEGIES. The Fund will invest in certain options for hedging purposes
and/or direct investment. The use of options involves certain special risks.
Options transactions also involve costs and may result in losses. Certain risks
arise from the possibility of imperfect correlations among movements in the
prices of options purchased or sold by the Fund and, in the case of hedging
transactions, of the securities that are the subject of the hedge. The
successful use of the strategies described above further depends on the
Adviser's ability to forecast market movements correctly.
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PERFORMANCE
No Bar Chart or Performance Table is presented because the Fund does not yet
have annual returns for a full calendar year.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that you may pay if you buy
and hold shares of each of the Funds:
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SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENTS):
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Maximum Sales Load Imposed on Purchases
(as a % of the offering price) 4.75%
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ESTIMATED ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS,
AS A % OF NET ASSETS):
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Management Fees(1) 1.00%
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Distribution (12b-1) Fees 0.50%
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Other Expenses (2)(3) 1.25%
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Annual Fund Operating Expenses(3) 2.75%
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(1) The Adviser has agreed contractually to waive some or all of its
advisory fees and reimbursement some or all of the Fund's other
expenses, other than extraordinary or non-recurring expenses, so that
the expense ratio of the Fund does not exceed 2.75% of its average net
assets. This arrangement will remain in effect until at least February
28, 2001.
(2) Other Expenses include, among other expenses, administrative, custody,
and transfer agency fees.
(3) Other Expenses and Total Fund Operating Expenses are estimated.
EXAMPLE:
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE FUND
WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
THE EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS
INDICATED AND THEN REDEEM ALL OF YOUR SHARES AT THE END OF THESE PERIODS. THE
EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND THAT THE
FUND'S OPERATING EXPENSES REMAIN THE SAME. ALTHOUGH YOUR ACTUAL COSTS MAY BE
HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS YOUR COST WOULD BE:
1 YEAR $740.00 3 YEARS $1288.00
THE EXAMPLE DOES NOT REFLECT SALES CHARGES (LOADS) ON REINVESTED DIVIDENDS AND
OTHER DISTRIBUTIONS. IF THESE SALES CHARGES (LOADS) WERE INCLUDED, YOUR COSTS
WOULD BE HIGHER.
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INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RISKS
The Imperial Financial Services Fund's investment objectives are fundamental and
may not be changed without shareholder approval. The investment strategies
employed by the Adviser to achieve the Fund's objectives are not fundamental and
may be changed or eliminated by the Company's Board of Directors, without
shareholder approval. The Fund has also adopted investment restrictions, some of
which are fundamental and may not be changed without shareholder approval, and
some of which are not fundamental and, therefore, may be changed by the
Company's Board of Directors.
INVESTMENT OBJECTIVES
The Fund seeks to provide investors with long-term capital appreciation with
income as a secondary objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing at least 65% of its total
assets in the equity securities of financial services companies that are
believed by the Adviser to offer superior prospects for long-term growth.
Companies in the financial services industry may include regional and money
center commercial banks, savings and loans associations, consumer and industrial
financial companies, securities brokerage companies, asset management companies,
insurance companies, real estate leasing and specialty finance companies (e.g.,
credit card, mortgage providers), government sponsored agencies, foreign
financial services companies (limited to 5% of total assets), and holding
companies for each of the foregoing. Pursuant to SEC regulations, the Fund may
not invest more than 5% of its total assets in the equity securities of any
company that derives more than 15% of its revenues from brokerage or investment
management activities. For liquidity purposes or pending the selection of
investments in furtherance of its investment objectives, the Fund may invest a
portion of its assets in U.S. Government securities and other high quality
short-term debt and money market instruments.
The Fund's investment portfolio may include the equity securities of financial
services companies of all sizes and types. The Adviser will select stocks of
financial service companies without regard to market capitalization based
primarily on its analysis of price/earnings ratios, the strength or potential
strength of a company's competitive position, strength of management, marketing
prowess and product development capabilities in order to acquire portfolio
securities which contain superior prospects for long-term growth. Accordingly,
the Adviser intends to focus on financial services companies with long histories
of profitability, low price to earnings ratios, strong revenue, and earnings
and/or dividend records.
The Fund may buy and sell covered call and put options on stock indexes. To help
assure appropriate liquidity, the Fund may acquire securities which provide for
the right to resell them to the issuer, a bank or a broker-dealer at a specified
price within a specified period of time prior to the maturity date of such
obligation. Such a right to resell, commonly known as a put option, may be sold,
transferred or assigned only with the underlying security. The Fund may engage
in such options transactions for hedging purposes and for non-hedging purposes,
such as to adjust its exposure to relevant markets or as a substitute for direct
investment.
Convertible preferred stock is preferred stock that can be converted
into common stock pursuant to its terms. Convertible debentures are debt
instruments that can be converted into common stock pursuant to their terms. The
Adviser intends to invest only in convertible debentures rated A or higher by
Standard & Poor's Corporation ("S&P") or by Moody's Investors Services, Inc.
("Moody's"). The Fund may hold warrants and rights issued in conjunction with
common stock, but in general will sell any such warrants or rights as soon as
practicable after they are received. Warrants are options to purchase equity
securities at a specified price valid for a specific time period which can be
purchased on the open market. Rights are similar to warrants, but normally have
a shorter duration and are distributed by the issuer to its shareholders.
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The Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies in attempting to
respond to adverse market, economic, political, regulatory or other conditions.
Under these circumstances, the Fund may hold all or a portion of its assets in
money market instruments (high quality income securities with maturities of less
than one year), securities of money market funds or U.S. Government repurchase
agreements. To the extent that the Fund resorts to a temporary defensive policy,
the Fund may not achieve its investment objective.
OTHER NON-PRINCIPAL INVESTMENT PRACTICES
SECURITIES LENDING. The Fund may lend portfolio securities, including entering
into repurchase agreements, amounting to not more than 25% of its assets to
broker-dealers. These transactions must be fully collateralized at all times
with cash and short-term debt obligations. These transactions involve some risk
to the Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
collateralized by the securities in which it may invest. A repurchase agreement
involves the purchase by the Fund of securities with the condition that the
original seller (a bank or broker-dealer) will buy back the same securities
("collateral") at a predetermined price or yield. Repurchase agreements involve
certain risks not associated with direct investments in securities. In the event
the original seller defaults on its obligation to repurchase, the Fund will seek
to sell the collateral, which could involve costs or delays. To the extent
proceeds from the sale of collateral are less than the repurchase price, the
Fund would suffer a loss.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in illiquid
securities which may include Restricted Securities. Illiquid securities may
offer a higher yield than securities which are more readily marketable, but they
may not always be marketable on advantageous terms. The sale of illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. "Restricted
securities" are securities which were originally sold in private placements and
which have not been registered under the Securities Act of 1933. Such securities
generally have been considered illiquid, since they may be resold only subject
to statutory restrictions and delays or if registered. Restricted securities are
no longer necessarily illiquid. The Fund may therefore invest in Rule 144A
securities and treat them as liquid when they have been determined to be liquid
by the Board of Directors of the Company.
BORROWING. The Fund may borrow money from banks for temporary or emergency
purposes in order to meet redemption requests. To reduce its indebtedness, the
Fund may have to sell a portion of its investments at a time when it may be
disadvantageous to do so. In addition, interest paid by the Fund on borrowed
funds would decrease its net earnings.
PORTFOLIO TURNOVER
The length of time the Fund has held a particular security is not generally a
consideration in investment decisions. As a result of the Fund's investment
policies, under certain market conditions, particularly in periods of volatile
markets, its portfolio turnover rate may be higher than that of other mutual
funds. During the fiscal year ending February 29, 2000, the portfolio turnover
for the Fund was 8.79%. In general, however, the Fund's portfolio turnover rate
is expected to range from 50% to 150%. Portfolio turnover generally involves
some expense, including brokerage commissions or dealer markups and other
transaction costs on the sale of securities and reinvestment in other
securities. These transactions may also result in realization of taxable capital
gains, some or all of which may be short-term capital gains not eligible for
favored tax treatment.
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<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE FUND
INVESTING IN MUTUAL FUNDS GENERALLY.
All mutual funds carry risk and you may lose money on your investment in the
Fund. The following describes the risks associated with investment in the Fund
that arise based on the Fund's investment objectives and strategies. As all
investment securities are subject to inherent market risks and fluctuations in
value due to earnings, economic and political conditions and other factors, the
Fund cannot give any assurance that its investment objective will be achieved.
INVESTMENT IN FINANCIAL SERVICES INDUSTRY.
The concentration of the Fund's investments in the financial services industry
will subject the Fund to risks in addition to those that apply to the general
equity market. Economic, legislative or regulatory developments may occur which
significantly affect the entire financial services industry and thus may subject
the Fund to greater market fluctuations than a fund that does not concentrate in
a particular industry. In addition, profitability is largely dependent on the
availability and cost of capital funds, and can fluctuate significantly when
interest rates change. Credit losses resulting from financial difficulties of
borrowers can also negatively impact these companies.
Investment banking, securities and commodities brokerage and investment advisory
companies are also subject to governmental regulation and investments in these
companies are subject to the risks related to securities and commodities trading
and securities underwriting activities. Insurance companies are also subject to
extensive governmental regulation, including the imposition of maximum rate
levels, which may be inadequate for some lines of businesses. The performance of
insurance companies will be further affected by interest rates, severe
competition in the pricing of services, claims activities, and marketing
competition conditions. Thus, a number of factors, in addition to general
economic conditions, can adversely affect the financial performance and
condition of the institutions in which the Fund invests.
Commercial banks, savings and loan institutions, finance companies and their
holding companies are especially influenced by adverse effects of volatile
interest rates, portfolio concentrations in loans to particular businesses, such
as real estate and energy, and competition from new entrants in their areas of
business. These institutions are subject to extensive federal regulation and, in
some cases, state regulation which may limit both the amounts and types of loans
and other financial commitments they can make, and the interest rates and fees
they can charge. However, neither federal insurance of deposits nor regulation
of the bank and savings and loan industries can ensure the solvency or
profitability of commercial banks or savings and loan institutions or their
holding companies, or insure against the risk of investing in the equity
securities issued by these institutions.
OPTIONS PORTFOLIO STRATEGIES
The use of options involves certain special risks. Options transactions also
involve costs and may result in losses. Certain risks arise from the possibility
of imperfect correlations among movements in the prices of options purchased or
sold by the Fund and, in the case of hedging transactions, of the securities
that are the subject of the hedge. The successful use of the strategies
described above further depends on the Adviser's ability to forecast market
movements correctly.
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<PAGE>
The Fund's ability to engage in options transactions and to sell related
securities may be limited by tax considerations and by certain regulatory
requirements. Other risks arise from the potential inability to close out
options positions. There can be no assurance that a liquid secondary market will
exist for any option at any particular time. The Fund's ability to terminate
option positions established in the over-the-counter market may be more limited
than for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would fail to meet their obligations
to the Fund. Certain provisions of the Internal Revenue Code and certain
regulatory requirements may limit the use of option transactions.
OTHER INVESTMENT RISKS
Some financial services companies in which the Fund may invest have small or
mid-size market capitalizations and may be subject to additional risks
associated with investment in such companies. The trading volume of securities
of smaller capitalization companies is normally less than that of larger
capitalization companies and, therefore, may disproportionately affect their
market price, tending to make them rise more in response to buying demand and
fall more in response to selling pressure than is the case with larger
capitalization companies.
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
BOARD OF DIRECTORS
The Company's Board of Directors has the primary responsibility for overseeing
the overall management of the Company and electing its officers.
INVESTMENT ADVISER
Retirement Planning Company of New England, Inc. (the "Adviser"), One Richmond
Square, Providence, Rhode Island, has been retained under an Investment Advisory
Agreement with the Company to act as the Fund's investment adviser subject to
the authority of the Board of Directors. The Adviser furnishes the Fund with
investment advice and supervises the Fund's management and investment programs.
The Adviser furnishes at its own expense all necessary administrative services,
office space, equipment and clerical personnel for servicing the investments of
the Fund. The Adviser also provides investment advisory facilities and executive
and supervisory personnel for managing the investments and effecting the
portfolio transactions of the Fund. In addition, the Adviser pays the salaries
and fees of all officers of the Company who are affiliated with the Adviser.
Under the Investment Advisory Agreement, the Fund pays the Adviser a monthly
advisory fee equal, on an annual basis, to 1.00% of its average daily net
assets. The investment adviser has contractually agreed to waive some or all of
its advisory fees and reimburse some or all of the Fund's other expenses, other
than extraordinary or non-recurring expenses, so that the expense ratio of the
Fund does not exceed 2.75% of its average net assets. This arrangement will
remain in effect until at least February 28, 2001.
The Adviser is engaged in the financial services business, focusing on providing
investment advisory services to over 110 private investment accounts for
individual investors, trusts, profit sharing and retirement plans, companies and
non-profit institutions. Since 1996, the Adviser has been engaged in the
business of researching, buying, holding and selling shares of equity
securities. Additionally, the Adviser offers, as a service to some of its
clients and others, a newsletter titled "The Imperial Stock Review". This
newsletter is dedicated to the fundamental analysis and research of selected
equity securities. As a result of research performed, the Adviser invests a
substantial portion of clients' portfolios in banks, brokerage firms, mutual
fund companies, insurance companies and other financial services companies. The
Adviser, based in Providence, RI, is registered as an investment adviser with
the Securities and Exchange Commission.
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<PAGE>
PORTFOLIO MANAGERS
Messrs. David W. Allaire and Michael R. Laliberte will be responsible for the
overall management of the Fund's portfolio. David W. Allaire is President and
Managing Director of the Adviser and has been a Senior Portfolio Manager with
the Adviser since April of 1996. He is also the Editor and Senior Security
analyst of the "The Imperial Stock Review" newsletter. Mr. Allaire has been
employed in the financial services industry since 1989 and currently holds the
following NASD licenses: Series 6, 63, 65, 7 and 24. Additionally, he is
licensed to offer various insurance products. He is currently enrolled in the
CFA program and is a Level II CFA candidate. Mr. Allaire is also Co-host of a
daily financial talk show called "Money Matters". The show is an in- depth
financial talk show which dedicates a majority of its time to the valuation and
research of equity securities, as well as the financial markets in general. Mr.
Allaire earned a Bachelor of Science Business Administration with a
concentration in Finance from the University of Rhode Island in 1988.
Michael R. Laliberte is the Executive Vice President and Managing Director of
the Adviser and has been a Senior Portfolio Manager with the Adviser since April
1996. He is also the Publisher and a Security Analyst for the "The Imperial
Stock Review" newsletter. Mr. Laliberte has been employed in the financial
services industry since 1990 and currently holds the following licenses: Series
6, 63, 65 and 7. Additionally, he is licensed to offer various insurance
products. Mr. Laliberte is currently a Professor of Investments at Johnson &
Wales University and has been so since 1996. Mr. Laliberte is also co-host of a
daily financial talk show called "Money Matters". Mr. Laliberte earned a
Bachelor of Science in management with a concentration in Finance from Johnson &
Wales University in 1989.
CODE OF ETHICS
The Company and the Adviser have adopted a Code of Ethics, which restricts
personal investing practices by employees of the Adviser and its affiliates.
Among other provisions, the Code of Ethics requires that employees with access
to information about the purchase or sale of securities in the Fund's portfolio
obtain preclearance before executing personal trades. With respect to Messrs.
Allaire and Laliberte and other investment personnel, the Code of Ethics
prohibits acquisition of securities in an initial public offering, as well as
profits derived from the purchase and sale of the same security within 60
calendar days. These provisions are designed to ensure that the interests of the
Fund and its shareholders come before the interests of the people who manage the
Fund. The Board of Directors of the Fund will approve the Fund's Code of Ethics
initially and will, from year to year thereafter, reapprove such Code after
consideration of any appropriate revisions.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Portfolio transactions for the Fund will generally be executed with
broker-dealers on an agency basis. The Adviser will be responsible for placing
all orders for purchases and sales of the Fund's securities. In selecting
broker-dealers, the Adviser may consider research and brokerage services
furnished to the Fund as well as to the Adviser and its affiliates. Subject to
seeking the most favorable price and execution available, the Adviser may
consider sales of shares of the Fund's shares (and of other future series of the
Company) as a factor in the selection of broker-dealers. In addition, any
portfolio transactions for the Fund that are executed on an agency basis may be
effected through the Distributor.
ADMINISTRATOR
The Fund's Administrator is American Data Services, Inc. ("ADS" or the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds with approximately $4 billion
of total assets through its offices in New York, Denver, and Los Angeles.
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<PAGE>
Pursuant to an Administrative Service Agreement with the Fund, the Administrator
provides all administrative services necessary for the Fund, subject to the
supervision of the Company's Board of Directors.
For the services rendered to the Fund by the Administrator, the Fund pays the
Administrator a monthly fee which is based on its average net assets. If the
Fund's average net assets are: less than $5 million, the Administrator's fee is
$1,950 per month; between $5 and $10 million, the Administrator's fee is $2,500
per month; between $10 and $20 million, the Administrator's fee is $3,000 per
month and in excess of $20 million, the Administrator receives $3,700 per month
or 0.175% of the Fund's average daily net assets, whichever is greater. The Fund
also pays the Administrator for any out-of-pocket expenses. In addition, the
Administrator serves as the Fund's transfer agent and performs fund accounting
services for which it is paid separately. For additional information, see
"Custodian, Transfer Agent and Dividend Agent."
Both the Investment Advisory Agreement and the Administrative Service Agreement
are terminable by the Board of Directors of the Company, the Adviser or the
Administrator, respectively, on sixty days' written notice. The Investment
Advisory Agreement will terminate automatically in the event of an "assignment"
as defined by the Investment Company Act. The Administrative Service Agreement,
however, may be assigned provided the non-assigning party provides prior written
consent. Each Agreement shall remain in effect for two years from the date of
its initial approval, and subject to annual approval of the Board of Directors
for one-year periods thereafter. Each Agreement provides that in the absence of
willful misfeasance, bad faith or gross negligence on the part of the Adviser or
the Administrator, respectively, or reckless disregard of its obligations
thereunder, the Adviser or the Administrator shall not be liable for any action
or failure to act in accordance with its duties thereunder.
DISTRIBUTOR
AmeriMutual Funds Distributors, Inc. ("the Distributor"), an affiliate of the
Administrator, has entered into a distribution agreement with the Company to
serve as distributor for the Fund's shares. The Distributor will be entitled to
receive a distribution fee equal to 0.50% of the Fund's average daily net assets
under the terms of the Fund's Distribution and Service Plan. The Distributor
will pay the promotional and advertising expenses related to the distribution of
the Fund's shares and for the printing of all Fund prospectuses used in
connection with the distribution and sale of the Fund's shares. It is expected
that the Distributor will use a portion of the distribution fee to compensate
financial intermediaries for providing distribution assistance with respect to
the sale of the Fund's shares.
The Adviser and the Distributor may, out of their own assets, pay for certain
expenses incurred in connection with the distribution of Fund shares. In
particular, the Distributor may make payments out of its own assets to sales
representatives and other broker dealers in connection with their sales of Fund
shares.
EXPENSES
The Fund pays certain operating expenses directly, including, but not limited to
custodian, audit, and legal fees; fees of the independent directors; costs of
printing and mailing prospectuses, statements of additional information, proxy
statements, notices, and reports to shareholders; insurance expenses; and costs
of registering its shares for sale under federal and state securities laws. See
the SAI for a more detailed discussion of independent director compensation.
-8-
<PAGE>
HOW TO PURCHASE SHARES OF THE FUND
This section describes how to buy and sell shares of the Fund, and the services
that are available to the Fund's shareholders.
HOW TO CONTACT THE FUND
For more information about the Fund or your account, you may write to us at:
Imperial Financial Services Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
Or you may call us toll free at (877) 732-7696
GENERAL INFORMATION
When you buy or sell ("redeem") shares of the Fund, the price of the shares will
be the net asset value per share, or "NAV", next calculated after the Transfer
Agent receives a properly completed purchase or redemption order plus any
applicable sales load (see below). For instance, if the Transfer Agent receives
your purchase request in proper form before 4 p.m., your transaction will be
priced at that day's NAV. If the Transfer Agent receives your purchase request
after 4 p.m., your transaction will be priced at the next day's NAV. The Fund
will not accept orders that request a particular day or price for the
transaction or any other special conditions.
WHEN AND HOW NAV IS DETERMINED. The Fund calculates its NAV as of the close of
the New York Stock Exchange ("NYSE") (normally 4:00 p.m., Eastern time) on each
weekday except days when the NYSE is closed. The time at which NAV is calculated
may be changed in case of an emergency or if the NYSE closes early. The Fund's
NAV is determined by taking the market value of all securities owned by the Fund
(plus all other assets such as cash), subtracting all liabilities and then
dividing the result (net assets) by the number of shares outstanding. The Fund
values securities for which market quotations are readily available at current
market value. If market quotations are not readily available, then securities
are valued at fair value, as determined by the Board.
SHARE CERTIFICATES. The Fund does not issue share certificates.
STATEMENT AND TRANSACTION CONFIRMATIONS. You will receive quarterly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmation.
SUSPENSION OF SERVICES DURING UNUSUAL MARKET CONDITIONS. The Fund may
temporarily suspend or discontinue any service or privilege during unusual
market conditions.
TYPES OF ACCOUNTS
If you are making an initial investment in the Fund, you will need to open one
of the following types of accounts:
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS. Individual and sole
proprietorship accounts are owned by one person, while joint accounts can have
two or more owners. Each individual owner of a joint account may give
instructions on purchase and redemptions without notice to the other owner.
Account Applications and written instructions to the Fund, or requests for
transactions that require a signature guarantee must be signed by both owners
exactly as their names appear on the account.
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<PAGE>
UNIFORM GIFT OR TRANSFER TO A MINOR ACCOUNTS (UGMA, UTMA). Depending on the laws
of your state, you can set up a custodial account under the Uniform Gift (or
Transfers) to Minors Act. These custodial accounts provide a way to give money
to a child and obtain tax benefits. Under the Uniform Transfers to Minors Act,
you may give up to $10,000 a year per child without paying Federal gift tax. To
open a UGMA or UTMA account, you must include the minor's social security number
on the application and the custodian, or trustee of the UGMA or UTMA must sign
instructions in a manner indicating trustee capacity.
CORPORATE AND PARTNERSHIP ACCOUNTS. To open a corporate or partnership account,
or to send instructions to the Fund, the following documents are required:
-- For CORPORATIONS, a corporate resolution signed by an authorized
person with a signature guarantee.
-- For PARTNERSHIPS, a certification for a partnership agreement, or the
pages from the partnership agreement that identify the general
partners.
An authorized officer of the corporation or other legal entity must sign the
application.
TRUST ACCOUNTS. The trust must be established before you can open a trust
account. To open the account you must include the name of each trustee, the name
of the trust and provide a certification for trust, or the pages from the trust
document that identify the trustees.
RETIREMENT ACCOUNTS. The Fund offers IRA accounts, including traditional and
Roth IRAs. Fund shares may also be an appropriate investment for other
retirement plans. Before investing in any IRA or other retirement plan, you
should consult your tax adviser. When you makes an investment in an IRA, be sure
to indicate the year in which the contribution is made.
The Fund may also be available for investment through various employer-sponsored
retirement plans such as 401(k) Plans. If you are eligible to participate in one
of these Plans, you should discuss the possibility of investing in the Fund with
your Plan's sponsor.
OPENING YOUR ACCOUNT
BY TELEPHONE
To open an account by telephone, call (877) 732-7696 to obtain an account number
and instructions. We will take information necessary to open your account,
including social security or tax identification number, over the phone.
After you have obtained an account number, you may purchase shares of the Fund
by wiring immediately available federal funds (subject to the minimum investment
amounts described below). The Fund will charge you a $10.00 wire fee. Your bank
may also charge a fee for doing this. You should instruct your bank to wire
funds to:
Firstar Bank, N.A.
ABA #: 0420-0001-3
F/B/O Imperial Financial Services Fund
Shareholder Account #: __________________
Shareholder Name:______________________
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<PAGE>
You will then need to mail a signed account application to:
Imperial Financial Services Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
BY MAIL
You may also open an account by mailing a completed and signed account
application, together with a check, to:
Imperial Financial Services Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
AUTOMATIC INVESTMENT PLANS
You may invest a specified amount of money in the Fund once or twice a month on
specified dates. These payments are taken from your bank account by automated
clearinghouse payment ("ACH"). Automatic investments must be for at least $100.
There is no charge for this service.
To open an Automatic Investment Plan account ("AIP"), call or write to us to
request and "Automatic Investment" form. Complete and sign the form, and return
it to us together with a voided check for the account from which payments will
be made.
INVESTMENT THROUGH THIRD PARTIES
You may be able to invest in shares of the Fund through a broker or other
financial institution, if the institution has made arrangements with the Fund's
Distributor. If you invest through a financial institution, the institution's
policies may be different than those of the Fund, and the institution may charge
fees in addition to those that the Fund charges. For example, banks, brokers,
retirement plans and financial advisers may charge transaction fees and may set
different minimum investments or limitations on buying or selling shares.
Consult a representative of your financial institution or retirement plan for
further information.
HOW TO PAY FOR YOUR PURCHASE OF SHARES
You may purchase shares of the Fund by check, automated clearinghouse ("ACH")
payment, or wire. All payments must be in U.S. dollars.
CHECKS. All checks must be drawn on U.S. banks and made payable to "Imperial
Financial Services Fund". No other method of check payment is acceptable (for
instance, you may not pay by travelers check).
ACH PAYMENTS. Instruct your financial institution to make an ACH payment to us.
These payments typically take two days. Your financial institution may charge
you a fee for this service.
WIRES. Instruct your financial institution to make a federal funds wire payment
to us. The Fund charges a $10.00 fee for receipt of a wire. Your financial
institution may also charge you a fee for this service.
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<PAGE>
INVESTMENT MINIMUMS
The Fund accepts investments in the following minimum amounts:
----------------------------------------- ----------------- ----------------
Individual, Sole proprietorship or $2000 $100
Joint accounts
----------------------------------------- ----------------- ----------------
Corporate, partnership or trust accounts $2000 $100
----------------------------------------- ----------------- ----------------
Uniform Gift or Transfer to a Minor $1000 $100
Accounts (ugma, utma)
----------------------------------------- ----------------- ----------------
Individual Retirement Accounts (IRA) $1000 $100
----------------------------------------- ----------------- ----------------
Automatic Investment Plans $1000 $100
----------------------------------------- ----------------- ----------------
The Fund may waive or reduce such minimum investment amounts from time to time:
SALES LOADS
The purchase price paid for Fund shares is the current public offering price,
that is, the next determined net asset value of the shares after the order is
placed plus any applicable sales load. The sales load is a one-time charge paid
at the time of purchase of shares, most of which ordinarily goes to the
investor's broker-dealer as compensation for the services provided to the
investor. Shares of the Fund are sold on a continuous basis at the public
offering price which includes a maximum front-end sales charge ( load) of 4.75%
being added to the net asset value per share. Volume discounts on the front-end
sales charge are provided for both initial purchase and for additional
purchases. See "Reduction or Elimination of Sales Loads" below. The Fund
reserves the right to reject any subscription for shares.
REDUCTION OR ELIMINATION OF SALES LOADS VIA VOLUME DISCOUNTS
Volume discounts are provided if the total amount being invested in shares of
the Fund reaches the levels indicated in the sales load schedule provided below.
The applicable volume discount available to investors is determined by
aggregating all share purchases of the Fund. Volume discounts are also available
to investors making sufficient additional purchases of Fund shares. The
applicable sales charge may be determined by adding to the total current value
of shares already owned in the Fund, the value of new purchases computed at the
offering price on the day the additional purchase is made. For example, if an
investor previously purchased, and still holds, shares worth $70,000 at the
current offering price and purchases an additional $30,000 worth of shares, the
sales charge applicable to the new purchase would be that applicable to the
$100,000 to $249,000 bracket in the sales load schedule provided below.
-12-
<PAGE>
<TABLE>
<CAPTION>
----------------------------- -------------------- ---------------------------------- --------------------------------
SALES CHARGE AS A AMOUNT OF SALES CHARGE
PERCENTAGE OF SALES CHARGE AS A PERCENT OF NET REALLOWED TO DEALERS AS A
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED PERCENT OF OFFERING PRICE
----------------------------- -------------------- ---------------------------------- --------------------------------
<S> <C> <C> <C>
$0 to $49,999 4.75% 4.99% 4.50%
----------------------------- -------------------- ---------------------------------- --------------------------------
$50,000 to $99,999 4.25% 4.44% 4.00%
----------------------------- -------------------- ---------------------------------- --------------------------------
$100,000 to $249,999 3.75% 3.90% 3.50%
----------------------------- -------------------- ---------------------------------- --------------------------------
$250,000 to $499,999 2.50% 2.56% 2.25%
----------------------------- -------------------- ---------------------------------- --------------------------------
$500,000 to $999,999 2.00% 2.04% 1.75%
----------------------------- -------------------- ---------------------------------- --------------------------------
In excess of $1 million 0 0 0
----------------------------- -------------------- ---------------------------------- --------------------------------
</TABLE>
LETTER OF INTENT
Any investor may sign a Letter of Intent, available from the Fund, stating an
intention to make purchases of Fund shares totaling a specified amount on an
aggregate basis within a period of thirteen months from the date of the initial
purchase. Purchases within the thirteen-month period can be made at the reduced
sales load applicable to the total amount of the intended purchase noted in the
Letter of Intent. If a larger purchase is actually made during the period, then
a downward adjustment will be made to the sales charge based on the actual
aggregate amount purchased. Any shares purchased within 90 days preceding the
actual signing of the Letter of Intent are eligible for the reduced sales charge
and the appropriate price adjustment will be made on those share purchases based
on the current offering price. A number of shares equal to 5% of the dollar
amount of intended purchases specified in the Letter of Intent is held in escrow
by the Transfer Agent until the purchases are completed. Dividends and
distributions on the escrowed Fund shares are paid to the investor. If the
intended purchases are not completed during the Letter of Intent period, the
investor is required to pay the Fund an amount equal to the difference between
the regular sales load applicable to a single purchase of the number of Fund
shares actually purchased and the sales load actually paid. If such payment is
not made within 20 days after written request by the Fund, then the Fund has the
right to redeem a sufficient number of escrowed shares to effect payment of the
amount due. Any remaining escrowed shares are then released to the investor's
account. Agreeing to a Letter of Intent does not obligate you to buy, or the
Fund to sell, the indicated amount of shares. You should read the Letter of
Intent carefully before signing.
PURCHASES AT NET ASSET VALUE
The Fund offers its Shares at net asset value with no sales charges to the
following types of purchasers:
1. Banks and other lending institutions that purchase shares of the Fund
in their fiduciary capacity or for their own accounts.
2. Investors who purchase shares of the Fund with redemption proceeds
from another mutual fund (which is not a series of the Company) on
which the investor has paid a front-end sales charge only.
3. Clients of certain securities dealers offering programs in which the
client pays a separate fee to an advisor providing financial
management or consulting services, including WRAP fee programs.
4. Certain fee paid investment advisers purchasing Shares on behalf of
their clients.
5. Investors who purchase through a broker-dealer or financial
intermediary that maintains a net asset value purchase program that
enables the Fund to realize certain economies of scale.
-13-
<PAGE>
6. Investment Advisors or Financial Planners who place trades for their
own accounts or the accounts of their clients and who charge a
management, consulting or other fee for their services.
7. Retirement and deferred compensation plans and trusts used to fund
those plans, including, but not limited to, those defined in section
401(a), 403(b), or 457 of the Internal Revenue Code and "rabbi
trusts."
8. Officers, directors/trustees, and employees of the Trust, the Advisor
or the Distributor; the immediate family members of any such person;
any trust or individual retirement account or self-employed retirement
plan for the benefit of any such person or family members; or the
estate of any such person or family members.
BANK TRUST DEPARTMENTS, SECURITIES DEALERS OFFERING WRAP PROGRAMS, INVESTMENT
ADVISERS OR FINANCIAL PLANNERS, AND OTHER FINANCIAL INTERMEDIARIES MAY CHARGE A
SEPARATE FEE FOR PURCHASES AND REDEMPTIONS OF THE FUND'S SHARES. NEITHER THE
FUND, THE ADVISER, NOR THE DISTRIBUTOR RECEIVES ANY PART OF THE FEES CHARGED
CLIENTS OF THESE FINANCIAL INTERMEDIARIES.
LIMITATIONS ON PURCHASES
The Fund reserves the right to refuse any purchase request, particularly
requests that could adversely affect the Fund or its operations. This includes
those from any individual or group who, in the Fund's view, is likely to engage
in excessive trading (usually defined as more than four exchanges out of the
Fund within a calendar year).
CANCELED OR FAILED PAYMENTS
The Fund accepts checks and ACH transfers at full value subject to collection.
If your payment for shares is not received or you pay with a check or ACH
transfer that does not clear, your purchase will be canceled. You will be
responsible for any losses or expenses incurred by the Fund or the Transfer
Agent, and the Fund may redeem other shares you own in the account as
reimbursement. The Fund and its agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.
DISTRIBUTION AND SERVICE PLAN
The Fund has adopted a Distribution and Service Plan (the "Plan"), pursuant to
Rule 12b-1 under the Act (the "Rule") that allows the Fund to pay distribution
fees for the sale and distribution of its shares. The Rule provides that an
investment company that bears any direct or indirect expense of distributing its
shares must do so only in accordance with a plan permitted by the Rule. The Plan
provides that the Fund will compensate the Distributor by paying the Distributor
a monthly fee equal to 0.50% of its average daily net assets, on an annual
basis, to enable it to provide marketing and promotional support to the Fund,
shareholder servicing and maintaining shareholder accounts and to make payments
to broker-dealers and other financial institutions with which it has written
agreements and whose clients are Fund shareholders for providing distribution
assistance. Fees paid under the Plan may not be waived for individual
shareholders. Shareholder servicing agents and broker-dealers may charge
investors a fee in connection with their use of specialized purchase and
redemption procedures offered to investors by the shareholder servicing agents
and broker-dealers. In addition, shareholder servicing agents and broker-dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in the Fund directly may impose charges, limitations,
minimums and restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly. Accordingly, the net return to
investors who invest through shareholder servicing agents and broker-dealers may
be less than by investing in the Fund directly. An investor should read the
Prospectus in conjunction with the materials provided by the shareholder
servicing agent and broker-dealer describing the procedures under which Fund
shares may be purchased and redeemed through the shareholder servicing agent and
broker-dealer.
-14-
<PAGE>
BECAUSE THESE FEES ARE PAID OUT OF THE FUND'S ASSETS ON AN
ON-GOING BASIS, OVER TIME THESE FEES WILL INCREASE THE COST OF YOUR INVESTMENT
AND MAY COST YOU MORE THAN PAYING OTHER TYPES OF SALES CHARGES.
HOW TO REDEEM SHARES OF THE FUND
You may redeem or sell all or any portion of on any day that the Fund values its
shares, subject to certain restrictions. The Fund will redeem your shares at the
net asset value next determined after the Fund receives your redemption request.
This section describes the procedures for redeeming your shares of the Fund, the
restrictions on redemptions, and the circumstances under which the Fund may
charge a redemption fee.
We will mail your redemption proceeds to your current address or transmit them
electronically to your designated bank account. Except under certain emergency
conditions, we will send the proceeds from your redemption to you within seven
days after we receive your redemption request. If the Fund has not yet collected
payment for the shares you are selling, however, it may delay sending redemption
proceeds until payment is collected.
BY MAIL
To redeem shares by mail, prepare a written request including:
-- Your name(s) and signature(s)
-- The name of the Fund, and your account number
-- The dollar amount or number of shares you want to redeem
-- How and where to send your proceeds
-- A signature guarantee, if required (see "Signature Guarantee
Requirements" below)
-- Any other required documentation, such as such as corporate
resolutions or trust documents
Mail your request and documentation to:
Imperial Financial Services Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
BY WIRE
You may only request payment of your redemption proceeds by wire if you have
previously elected wire redemption privileges on your account application or a
separate form.
Wire requests are only available if your redemption is for $1,000 or more. If
there are any wire charges, they will be deducted from the proceeds of your
redemption. Telephone redemptions are not available for IRA accounts.
To request a wire redemption, mail us your request (See "By Mail"), or call us
with your request. If you wish to make your wire request by telephone, however,
you must have previously elected telephone redemption privileges.
-15-
<PAGE>
BY TELEPHONE
We accept redemption requests by telephone only if you have elected telephone
redemption privileges on your account application or a separate form.
To redeem shares by telephone, call us with your request. You will need to
provide your account number and the exact name(s) in which the account is
registered. We may also require a password or additional forms of
identification.
Your proceeds will be mailed to you or wired (if you have elected wire
redemption privileges - See "By Wire" above)
Telephone redemptions are easy and convenient, but this account option involves
a risk of loss from unauthorized or fraudulent transactions. We will take
reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and by reviewing immediately
any account statement and transaction confirmations that you receive. Neither
the Fund nor the Transfer Agent will be responsible for any losses due to
telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity.
AUTOMATIC REDEMPTION
If you own shares of the Fund with an aggregate value of at least $10,000, you
may request a specified amount of money from your account once a month or once a
quarter on a specified date. These payments are sent from your account to a
designated bank account by ACH payment. Automatic redemptions must be for at
least $50.
To set up periodic redemptions automatically, call or write us for an "Automatic
Redemption" form. You should complete the form and mail it to us with a voided
check for the account into which you would like the redemption proceeds
deposited.
REDEMPTIONS THROUGH THIRD PARTIES
If you hold shares through a broker or other financial institution, you will
have to redeem your shares through that financial institution. The net asset
value you receive will be the next calculated after receipt of the order from
the dealer. Consult a representative of your financial institution or retirement
plan for further information.
SIGNATURE GUARANTEE REQUIREMENTS
To protect you and the Fund against fraud, signatures on certain requests must
have a "signature guarantee." For requests made in writing a signature guarantee
is required for any of the following:
-- Redemption of over $5,000 worth of shares
-- Changes to a shareholder's record name or address
-- Redemption from an account for which the address or account
registration has changed within the last 30 days
-- Sending proceeds to any person, address, brokerage firm or bank
account not on record
-- Sending proceeds to an account with a different registration (name or
ownership) from yours
-16-
<PAGE>
-- Changes to automatic investment or redemption programs, distribution
options, telephone or wire redemption privileges, any other election
in connection with your account. A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public.
SMALL ACCOUNTS/INVOLUNTARY REDEMPTION
If the value of your account in the Fund falls below $500 (not including IRAs),
the Fund may ask you to increase your balance. If the account value is still
below $500 after 30 days, the Fund may close your account and send you the
proceeds. The Fund will not close your account if it falls below these amounts
solely as a result of a reduction in your account's market value.
REDEMPTION IN KIND
The Fund reserves the right to make redemptions "in kind" -- payment of
redemption proceeds in portfolio securities rather than cash -- if the amount
requested is the greater of $250,000 or 1% of the Fund's assets.
LOST ACCOUNTS
The Transfer Agent will consider your account "lost" if correspondence to your
address of record is returned as undeliverable, unless the Transfer Agent
determines your new address. When an account is "lost," all distributions on the
account will be reinvested in additional shares of the Fund. In addition, the
amount of any outstanding (unpaid for six months or more) checks for
distributions that have been returned to the Transfer Agent will be reinvested
and the checks will be canceled.
TRANSFERRING REGISTRATION
You may transfer the registration of your Fund shares. To do so, call us at
(877) 732-7696 , or write the Imperial Financial Services Fund c/o American Data
Services, Inc., P.O. Box 5536, Hauppauge, NY 11788-0132, to request an account
transfer form. You should then return the completed form to the same address.
SHAREHOLDER SERVICES
The Fund offers several shareholder service options to make your account easier
to manage which are listed on the account application. Please make note of these
options and select the ones that are appropriate for you.
AUTOMATIC INVESTMENT PROGRAM
You may arrange to make additional automated purchases of Fund shares by
completing the required section of the account application included with this
prospectus. You can automatically transfer $100 or more per month from your
bank, savings and loan or other financial institution to purchase additional
shares. You should contact your broker-dealer, financial institution or the
Transfer Agent to obtain additional application forms or for additional
information.
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<PAGE>
TELEPHONE TRANSACTION PRIVILEGES
If you hold your shares in an account with the Transfer Agent, you may authorize
telephone privileges by completing the required section of the account
application included with this prospectus. Please contact the Transfer Agent for
an additional application or for more details. It may be difficult to reach the
Fund by telephone during periods when market or economic conditions lead to an
unusually large volume of telephone activity. If you cannot reach the Fund by
telephone, you should contact your broker-dealer, financial institution or issue
written instructions to the Transfer Agent at the address set forth herein. See
" Custodian, Transfer Agent, and Dividend Disbursing Agent." The Fund reserves
the right to modify, suspend or terminate their telephone services at any time
without notice.
TAX-QUALIFIED RETIREMENT PLANS
The Fund is available for your tax-deferred retirement plan. Call or write us
and request the appropriate forms for: o Individual Retirement Accounts
("IRAs"), Simple IRAs and Roth IRAs; o 403(b) plans for employees of public
school systems and non-profit organizations; or o 401(k) Plans; o Profit-sharing
plans and pension plans for corporations and other employees.
You can also transfer your tax-deferred plan to us from another company or
custodian. Call or write us for a "Request to Transfer" form.
CONFIRMATION OF TRANSACTIONS AND REPORTING OF OTHER INFORMATION
The Fund will mail you confirmations of all of your purchases or redemptions of
Fund shares. In addition, you will also receive account statements on a
quarterly basis. This information will be provided to you from either your
broker-dealer, financial institution or the Transfer Agent. You will also
receive various IRS forms after the first of each year detailing important tax
information and the Fund is required to supply annual and semi-annual reports
that list securities held by the Fund and include its then current financial
statements.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute its net investment income, if any, and net realized
capital gains, if any, annually. Distributions from capital gains are made after
applying any available capital loss carryovers. As a shareholder in the Fund,
you can choose from three distribution options:
-- Reinvest all distributions in additional shares;
-- Receive distributions from net investment income in cash while
reinvesting capital gains
-- distributions, if any, in additional shares; or
-- Receive all distributions in cash.
You can change your distribution option by notifying the Fund in writing. If you
do not select an option when you open your account, all distributions will be
reinvested in additional shares of the Fund at net asset value. You will receive
a statement confirming reinvestment of distributions in additional shares
promptly following the end of each calendar year.
-18-
<PAGE>
If a check representing a distribution is not cashed within a specified period,
the Transfer Agent will notify you that you have the option of requesting
another check or reinvesting the distribution in the Fund. If the Transfer Agent
does not receive your election, the distribution will be reinvested in the Fund
at the then-current net asset value per share. Similarly, if correspondence sent
by the Fund or the Transfer Agent is returned as "undeliverable," all Fund
distributions will automatically be reinvested in the Fund.
VALUATION OF SHARES
The Fund computes its net asset value (or price per share) at the end of the
regular session of trading on each day the NYSE is open for business. Portfolio
securities for which market quotations are readily available are valued at
market value. Portfolio securities for which market quotations are not
considered readily available, are stated at fair value on the basis of
valuations furnished by a pricing service approved by the Board of Directors
which determines valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders.
FOREIGN SECURITIES
Trading in foreign securities may be completed at times when the NYSE is closed.
In computing the Fund's NAV, the adviser values foreign securities at the latest
closing price on the exchange on which they are traded immediately prior to the
closing of the NYSE. Certain foreign currency exchange rates may also be
determined at the latest rate prior to the closing of the NYSE. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
NYSE. If such events materially affect the value of portfolio securities, these
securities may be valued at their fair value as determined in good faith by the
Fund's Board of Directors.
TAX STATUS
The Fund is treated as a corporation for federal income tax purposes under the
Internal Revenue Code of 1986, as amended. The Fund intends to qualify and to
elect to be treated as a regulated investment company. If so qualified, the Fund
will not be liable for federal income taxes to the extent they distribute
taxable income to shareholders.
The Fund intends to make distributions that may be taxed as ordinary income and
capital gains (which may be taxable at different rates depending on the length
of time that the Fund holds its assets). Distributions to shareholders by the
Fund, whether received in cash or reinvested in additional shares of the Fund,
are generally subject to federal income tax at varying rates depending on
whether such distributions are treated as ordinary income or capital gains
distributions. Interest income from direct investment by non-corporate taxpayers
in United States Government obligations (but not repurchase agreements)
generally is not subject to state taxation. However, some states may tax mutual
fund dividends attributable to such income.
Any redemption of the Fund's shares is a taxable event that may result in a
capital gain or loss.
Before investing in the Fund, you should consult your tax adviser regarding the
consequences of your local and state tax laws.
-19-
<PAGE>
PERFORMANCE COMPARISONS
Advertisements and other sales literature may refer to the Fund's total return.
The total return for the one, five and ten-year periods (or for the life of the
Fund until the Fund is in existence for such longer periods) through the most
recent calendar quarter represents the average annual compounded rate of return
on an investment of $1,000 in the Fund invested at the public offering price,
plus any applicable sales load. Total return may also be presented for other
periods. All data are based on past investment results and do not predict future
performance. Investment performance, which will vary, is based on many factors,
including market conditions, portfolio composition and Fund operating expenses.
Investment performance also often reflects the risks associated with the Fund's
investment objectives and strategies. These factors should be considered when
comparing the Fund's investment results with those of other mutual funds and
other investment vehicles.
Quotations of investment performance for any period when an expense limitation
is in effect will be greater than if the limitation had not been in effect. Fund
performance may be compared to that of various indexes.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Firstar Bank, N.A. serves as custodian for the Fund's cash and securities. The
Custodian does not assist in, and is not responsible for, investment decisions
involving assets of the Fund. American Data Services, Inc., the Fund's
Administrator, also acts as the Fund's transfer and dividend disbursing agent.
The Fund pays the Administrator the greater of $1,250 per month or $9.00 per
year per account, plus out-of-pocket expenses, for rendering such transfer and
dividend agency services.
COUNSEL AND INDEPENDENT AUDITORS
Legal matters in connection with the issuance of shares of common stock of the
Fund are passed upon by Spitzer & Feldman P.C., 405 Park Avenue, New York, New
York 10022. McCurdy & Associates CPA's, Inc., 27955 Clemens Road, Westlake, Ohio
44145, have been selected as independent auditors for the Fund.
-20-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past year. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that an investor would have earned on an investment in the Fund (assuming
investment of all dividends and distributions). The information for the year
ending February 29, 2000 has been audited by McCurdy & Associates CPA's, Inc.,
whose report, along with the Fund's financial statements, are included in the
annual report, which is available upon request.
<TABLE>
<CAPTION>
IMPERIAL FINANCIAL SERVICES FUND
FINANCIAL HIGHLIGHTS
(For a fund share outstanding throughout each period)
For the
year ended
February 29, 2000
-----------------
<S> <C>
Net asset value, beginning of period ....................... $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment loss ......................................... (0.11)
Net realized and unrealized loss on investments ............. (1.43)
Total from investment operations ............................. (1.54)
LESS DISTRIBUTIONS
Dividends from net investment income ........................ 0.00
Distributions from net realized gains ....................... 0.00
Total dividends and distributions ........................... 0.00
Net asset value, end of period ............................... $ 8.46
Total return* ............................................... (15.40%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ................... $ 1,054
Ratio of expenses to average
net assets, net of reimbursement ........................ 2.75%
Ratio of expenses to average
net assets, before reimbursement ....................... 11.75%
Ratio of net investment loss to average
net assets, net of reimbursement ....................... (1.17%)
Ratio of net investment loss to average
net assets, before reimbursement ....................... (10.17%)
Portfolio turnover rate ..................................... 8.79%
<FN>
* The return does not include the effect of the Fund's sales charge.
</FN>
</TABLE>
-21-
<PAGE>
QUESTAR FUNDS, INC.
IMPERIAL FINANCIAL SERVICES FUND
More information on the Fund is available free upon request, including the
following:
ANNUAL/SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments is available in the Fund's annual and semi-annual reports
to shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal
year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI provides more
detailed information about the Fund and is incorporated by reference
into this Prospectus.
You may obtain free copies of both reports and the SAI, request other
information and discuss your questions about the Fund by contacting the Fund at:
Imperial Financial Services Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
1-877 732-7696
You can also review the Fund's reports and SAI by visiting the Public Reference
Room of the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, DC 20549. Please call 1-202-942-8090 for information relating to the
hours and operation of the Public Reference Room. You may request copies of the
Fund's reports and SAI, for a fee, by writing to the Public Reference Room at
this address, or by e-mailing your request to [email protected]. You may also
download a free, text-only version from the Commission's Internet website at
www.sec.gov.
The Fund's Investment Company Act File No. 811-08655
<PAGE>
QUESTAR FUNDS, INC.
IMPERIAL FINANCIAL SERVICES FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 15, 2000
TABLE OF CONTENTS
PAGE
----
Investment Objecives, Policies, and Risk Factors.............................. 2
Directors and Executive Officers..............................................11
Investment Advisory and Other Services........................................13
Shareholder Servicing & Distribution Plan.....................................17
Portfolio Transactions and Allocation of Brokerage............................20
Taxation......................................................................22
Ownership of Shares...........................................................24
Purchase of Shares............................................................24
Dividends and Distributions...................................................25
Net Asset Value...............................................................25
Performance Comparisons.......................................................25
Redemption of Shares..........................................................28
Counsel and Independent Auditors..............................................30
Other Information.............................................................30
Financial Statements..........................................................30
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Fund's Prospectus dated April 15, 2000. A copy of the
Prospectus may be obtained from the Fund at The Hauppauge Corporate Center, 150
Motor Parkway, Hauppauge, New York 11788 or telephone (516) 951-0500.
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The Imperial Financial Services Fund's (the "Fund") investment objectives as set
forth in the Prospectus are fundamental and may not be changed without a vote of
a majority of the Fund's shares. Additional information regarding the Fund's
investment policies and restrictions is set forth below.
INVESTMENT POLICIES
The following paragraphs provide a more detailed description of the investment
policies identified in the Prospectus. Unless otherwise noted, the policies
described in this Statement of Additional Information are not fundamental and
may be changed by the Board of Directors.
REPURCHASE AGREEMENTS.
----------------------
The Fund may invest in repurchase agreements. A repurchase agreement involves
the purchase by the Fund of the securities with the condition that after a
stated period of time the original seller will buy back the same securities at a
predetermined price or yield. The Fund's custodian will hold the securities
underlying any repurchase agreement or such securities will be part of the
Federal Reserve Book Entry System. The market value of the collateral underlying
the repurchase agreement will be determined on each business day. If at any time
the market value of the Fund's collateral falls below the repurchase price of
the repurchase agreement (including any accrued interest), the Fund will
promptly receive additional collateral (so the total collateral is an amount at
least equal to the repurchase price plus accrued interest).
FOREIGN SECURITIES.
-------------------
Under its current policy, which may be changed without shareholder approval, the
Fund may invest up to 5% of its total assets in securities principally traded in
markets outside the United States. Eurodollar certificates of deposit are
excluded for purposes of this limitation. Since foreign securities are normally
denominated and traded in foreign currencies, the value of the Fund's assets may
be affected favorably or unfavorably by changes in currency exchange rates,
exchange control regulations, foreign withholding taxes and restrictions or
prohibitions on the repatriation of foreign currencies. There may be less
information publicly available about a foreign company than about a U.S.
company, and foreign companies are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to those in the
United States. The securities of some foreign companies are less liquid and at
times more volatile than securities of comparable U.S. companies. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses not present in the
settlement of domestic investments.
In addition, there may be a possibility of nationalization or expropriation of
assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability and diplomatic developments which could
affect the value of the Fund's investments in certain foreign countries. Legal
remedies available to investors in certain foreign countries may be more limited
than those available with respect to investments in the United States or in
other foreign countries. The laws of some foreign countries may limit the Fund's
ability to invest in securities of certain issuers located in those foreign
countries. Special tax considerations apply to foreign securities.
1
<PAGE>
The risks described above, including the risks of nationalization or
expropriation of assets, are typically increased to the extent that the Fund
invests in issuers located in less developed and developing nations, whose
securities markets are sometimes referred to as "emerging securities markets."
Investments in securities located in such countries are speculative and subject
to certain special risks. Political and economic structures in many of these
countries may be in their infancy and developing rapidly, and such countries may
lack the social, political and economic stability characteristic of more
developed countries. Certain of these countries have in the past failed to
recognize private property rights and have at times nationalized and
expropriated the assets of private companies. The Fund does not currently intend
to invest in the securities of less developed and developing nations.
In addition, unanticipated political or social developments may affect the value
of the Fund's investments in these countries and the availability to the Fund of
additional investments in these countries. The small size, limited trading
volume and relative inexperience of the securities markets in these countries
may make the Fund's investments in such countries illiquid and more volatile
than investments in more developed countries, and the Fund may be required to
establish special custodial or other arrangements before making investments in
these countries. There may be little financial or accounting information
available with respect to issuers located in these countries, and it may be
difficult as a result to assess the value or prospects of an investment in such
issuers.
PRIVATE PLACEMENTS.
------------------
The Fund may invest in securities that are purchased in private placements
(primarily Rule 144A securities) and, accordingly, are subject to restrictions
on resale as a matter of contract or under Federal securities laws. Because
there may be relatively few potential purchasers for such investments,
especially under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer, the Fund could find it
more difficult to sell such securities when the Adviser believes it advisable to
do so or may be able to sell such securities only at prices lower than if such
securities were more widely held. At times, it may also be more difficult to
determine the fair value of such securities for purposes of computing the Fund's
net asset value.
SECURITIES LOANS.
----------------
The Fund may make secured loans of its portfolio securities, on either a
short-term or long-term basis, amounting to not more than 25% of its total
assets, thereby realizing additional income. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss rights in the collateral should the
borrower fail financially. As a matter of policy, securities loans are made to
broker-dealers pursuant to agreements requiring that the loans be continuously
secured by collateral consisting of cash or short-term debt obligations at least
equal at all times to the value of the securities on loan, "marked-to-market"
daily. The borrower pays to the Fund an amount equal to any dividends or
interest received on securities lent. The Fund retains all or a portion of the
interest received on investment of the cash collateral or receives a fee from
the borrower. Although voting rights, or rights to consent, with respect to the
loaned securities may pass to the borrower, the Fund retains the right to call
the loans at any time on reasonable notice, and it will do so to enable the Fund
to exercise voting rights on any matters materially affecting the investment.
The Fund may also call such loans in order to sell the securities.
2
<PAGE>
PUTS.
-----
To help assure appropriate liquidity, the Fund may acquire securities which
provide for the right to resell them to the issuer, a bank or a broker-dealer at
a specified price within a specified period of time prior to the maturity date
of such obligation. Such a right to resell, which is commonly known as a "put,"
may be sold, transferred or assigned only with the underlying security or
securities.
If an issuer, bank or broker-dealer should default on its obligation to
repurchase a security, the Fund might be unable to recover all or a portion of
any loss sustained from having to sell the security elsewhere. It will be the
Fund's policy to enter into puts only with issuers, banks or broker-dealers that
are determined by the Adviser to present minimal credit risks.
WRITING COVERED OPTIONS ON SECURITIES.
-------------------------------------
The Fund may write covered call options and covered put options on optionable
securities held in its portfolio, when in the opinion of the Adviser such
transactions are consistent with the Fund's investment objective and policies.
Call options written by the Fund give the purchaser the right to buy the
underlying securities from the Fund at a stated exercise price; put options give
the purchaser the right to sell the underlying securities to the Fund at a
stated price.
The Fund may write only covered options, which means that, so long as the Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the Fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The Fund may
write combinations of covered puts and calls on the same underlying security.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's return on the underlying security in the event the option
expires unexercised or is closed out at a profit. The amount of the premium
reflects, among other things, the relationship between the exercise price and
the current market value of the underlying security, the volatility of the
underlying security, the amount of time remaining until expiration, current
interest rates, and the effect of supply and demand in the options market and in
the market for the underlying security. By writing a call option, the Fund
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option but continues to bear
the risk of a decline in the value of the underlying security. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then-current market
value, resulting in a potential capital loss unless the security subsequently
appreciates in value.
The Fund may terminate an option that it has written prior to its expiration by
entering into a closing purchase transaction, in which it purchases an
offsetting option. The Fund realizes a profit or loss from a closing transaction
if the cost of the transaction (option premium plus transaction costs) is less
or more than the premium received from writing the option. If the Fund writes a
call option but does not own the underlying security, and when it writes a put
option, the Fund may be required to deposit cash or securities with its broker
as "margin," or collateral, for its obligation to buy or sell the underlying
security. As the value of the underlying security varies, the Fund may have to
deposit additional margin with the broker. Margin requirements are complex and
are fixed by individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and other
self-regulatory organizations.
3
<PAGE>
PURCHASING CALL OPTIONS.
------------------------
The Fund may purchase call options to hedge against an increase in the price of
securities that the Fund wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs.
RISK FACTORS IN OPTIONS TRANSACTIONS.
-------------------------------------
The successful use of the Fund's options strategies depends on the ability of
the Adviser to forecast correctly interest rate and market movements. For
example, if the Fund were to write a call option based on the Adviser's
expectation that the price of the underlying security would fall, but the price
were to rise instead, the Fund could be required to sell the security upon
exercise at a price below the current market price. Similarly, if the Fund were
to write a put option based on the Adviser's expectation that the price of the
underlying security would rise, but the price were to fall instead, the Fund
could be required to purchase the security upon exercise at a price higher than
the current market price.
When the Fund purchases an option, it runs the risk that it will lose its entire
investment in the option in a relatively short period of time, unless the Fund
exercises the option or enters into a closing sale transaction before the
option's expiration. If the price of the underlying security does not rise (in
the case of a call) or fall (in the case of a put) to an extent sufficient to
cover the option premium and transaction costs, the Fund will lose part or all
of its investment in the option. This contrasts with an investment by the Fund
in the underlying security, since the Fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on the Fund's ability to terminate
option positions at times when the Adviser deems it desirable to do so. There is
no assurance that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price.
If a secondary market in options were to become unavailable, the Fund could no
longer engage in closing transactions. Lack of investor interest might adversely
affect the liquidity of the market for particular options or series of options.
A market may discontinue trading of a particular option or options generally. In
addition, a market could become temporarily unavailable if unusual events --
such as volume in excess of trading or clearing capability -- were to interrupt
its normal operations.
A market may at times find it necessary to impose restrictions on particular
types of options transactions, such as opening transactions. For example, if an
underlying security ceases to meet qualifications imposed by the market or the
Options Clearing Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening transactions in
existing series may be prohibited. If an options market were to become
unavailable, the Fund as a holder of an option would be able to realize profits
or limit losses only by exercising the option, and the Fund, as option writer,
would remain obligated under the option until expiration or exercise.
4
<PAGE>
Disruptions in the markets for the securities underlying options purchased or
sold by the Fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that security
is normally halted as well. As a result, the Fund as purchaser or writer of an
option will be unable to close out its positions until options trading resumes,
and it may be faced with considerable losses if trading in the security reopens
at a substantially different price. In addition, the Options Clearing
Corporation or other options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in the option has
also been halted, the Fund as purchaser or writer of an option will be locked
into its position until one of the two restrictions has been lifted. If the
Options Clearing Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by the writers of
all outstanding calls in the event of exercise, it may prohibit indefinitely the
exercise of put options. The Fund, as holder of such a put option, could lose
its entire investment if the prohibition remained in effect until the put
option's expiration.
Foreign-traded options are subject to many of the same risks presented by
internationally-traded securities. In addition, because of time differences
between the United States and various foreign countries, and because different
holidays are observed in different countries, foreign options markets may be
open for trading during hours or on days when U.S. markets are closed. As a
result, option premiums may not reflect the current prices of the underlying
interest in the United States.
Over-the-counter ("OTC") options purchased by the Fund and assets held to cover
OTC options written by the Fund may, under certain circumstances, be considered
illiquid securities for purposes of any limitation on the Fund's ability to
invest in illiquid securities.
OPTIONS ON INDICES.
-------------------
As an alternative to purchasing call and put options on index futures, the Fund
may purchase and sell call and put options on the underlying indices themselves.
Such options would be used in a manner identical to the use of options on index
futures.
RESTRICTED SECURITIES.
----------------------
The SEC Staff currently takes the view that any delegation by the Board of
Directors of the authority to determine that a restricted security is readily
marketable (as described in the investment restrictions of the Fund) must be
pursuant to written procedures established by the Board of Directors. It is the
present intention of the Board of Directors that, if the Board of Directors
decide to delegate such determinations to the Adviser or another person, they
would do so pursuant to written procedures, consistent with the Staff's
position. Should the Staff modify its position in the future, the Board of
Directors would consider what action would be appropriate in light of the
Staff's position at that time.
ILLIQUID SECURITIES.
--------------------
As set forth in the Prospectus, the Fund may invest in Rule 144A securities and
commercial paper issued pursuant to Rule 4(2) under the Securities Act of 1933,
and treat such securities as liquid when they have been determined to be liquid
by the Board of Directors or by the Adviser subject to the oversight of and
pursuant to procedures adopted by the Board of Directors. Under these
procedures, factors taken into account in determining the liquidity of a
security include (a) the frequency of trades and quotes for the security; (b)
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (c) dealer undertakings to make a market in the
security; and (d) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer). With respect to Rule 144A
securities, investing in such securities could have the effect of increasing the
level of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities.
5
<PAGE>
CONCENTRATION.
--------------
The Fund, as a fundamental policy, will concentrate its investments by investing
25% or more of the value of its total assets in the securities of issuers
conducting their principal business activities in the financial services
industry, in accordance with its investment objectives. The Fund may also invest
more than 25% of its assets in the securities of the U.S. Government or its
agencies and instrumentalities and repurchase agreements relating thereto.
TEMPORARY DEFENSIVE INVESTMENTS.
-------------------------------
The Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies in attempting to
respond to adverse market, economic, political, regulatory or other conditions.
Under these circumstances, the Fund may hold all or a portion of its assets in
money market instruments (high quality income securities with maturities of less
than one year), securities of money market funds or U.S. Government repurchase
agreements. To the extent that the Fund resorts to a temporary defensive policy,
the Fund may not achieve its investment objective.
INVESTMENT RESTRICTIONS
In addition to the investment objective and policies set forth in the Prospectus
and in this Statement of Additional Information, the Fund is subject to certain
fundamental and non-fundamental investment restrictions, as set forth below.
Fundamental investment restrictions may not be changed with respect to the Fund
individually, without the vote of a majority of the Fund's outstanding shares.
Non-fundamental investment restrictions of the Fund may be changed by the Board
of Directors.
As fundamental investment restrictions, the Fund will not:
1. Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities), if, as a
result, as to 75% of the Fund's total assets, more than 5% of its net assets
would be invested in the securities of one issuer or the Fund would hold more
than 10% of the outstanding voting securities of any one issuer.
2. Issue any senior securities, as defined in the Investment Company Act of
1940, as amended (the "1940 Act"), other than as set forth in restriction number
3 below. Purchasing or selling securities on a when-issued or delayed delivery
basis shall not be deemed a senior security for purposes of this restriction
number 2.
3. Borrow amounts in excess of 10% of the cost or 5% of the market value of its
total assets, whichever is less, and then only from a bank and as a temporary
measure for extraordinary or emergency purposes. To secure any such borrowing,
the Fund may pledge or hypothecate not in excess of 15% of the value of its
total assets.
6
<PAGE>
4. Purchase or sell real estate or commodities or commodity futures contracts.
This restriction shall not preclude the Fund from investing in financial
services companies that own real estate or that buy and sell real estate.
5. Act as an underwriter of securities of other issuers, except insofar as the
Fund may be technically deemed an underwriter under the federal securities laws
in connection with the disposition of portfolio securities.
6. Engage in any short-selling operations.
7. Engage in margin transactions or in transactions involving puts, calls,
straddles, or spreads, except as permitted by the Fund under its investment
policies.
8. Invest in the securities of one industry except the financial services
industry, with the exception of securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities, if as a result, more than 20% of
the Fund's total assets would be invested in the securities of such industries.
9. Acquire or retain more than 5% of the securities of any other investment
company.
10. Make loans.
The Fund is also subject to the following restrictions that are not fundamental
and may therefore be changed by the Board of Directors without shareholder
approval.
The Fund will not:
1. Acquire securities for the purpose of exercising control over management.
2. Invest more than 15% of its net assets in securities determined by the Board
of Directors to be illiquid.
Unless otherwise indicated, percentage limitations included in the restrictions
apply at the time the Fund enters into a transaction. Accordingly, any later
increase or decrease beyond the specified limitation resulting from a change in
the Fund's net assets will not be considered in determining whether it has
complied with its investment restrictions.
DIRECTORS AND EXECUTIVE OFFICERS
The Fund is supervised by the Board of Directors of Questar Funds, Inc (the
"Company"). The Board of Directors consists of five individuals, four of whom
are not "interested persons" of the Fund as that term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). The Directors are
fiduciaries for the Fund's shareholders and is governed by the laws of the State
of Maryland in this regard. They establish policies for the operation of the
Company and the Fund and appoint the officers who conduct the daily business of
the Fund. The Directors of the Fund are listed below with their addresses,
present positions with the Company and principal occupations over at least the
last five years. Directors who are interested persons, as defined by the 1940
Act, are indicated by asterisk.
7
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------ --------------------------------------------- ---------------------------
NAME (AGE) AND PRINCIPAL OCCUPATION AND OTHER
ADDRESS BUSINESS EXPERIENCE DURING THE POSITIONS HELD WITH THE
PAST FIVE (5) YEARS COMPANY
------------------------------------------ --------------------------------------------- ---------------------------
<S> <C> <C>
DANIEL ABRAMSON (49) President and Chief Executive Officer, Director
c/o Dunhill Staffing Systems, Inc. Dunhill Staffing Systems, Inc.
150 Motor Parkway (1994-Present), having joined Dunhill in
Hauppauge, NY 11788 1986 as a franchise owner in Providence,
RI. He served as Franchise Advisory
Council President (1990-1992) and is a
member of the National Association of
Personnel Services, a trade organization.
------------------------------------------ --------------------------------------------- ---------------------------
PHILIP A. CAPALONGO (44) Managing Director in Capital Investments Director
211 Mill River Road Partners, an investment banking firm.
Oyster Bay, NY 11771 Prior thereto, he served in a number of
senior management positions at
TeleTechnologies, a technology company, and
Michaels, Edgar & Phillips, an investment
banking firm.
------------------------------------------ --------------------------------------------- ---------------------------
ANTHONY J. HERTL, (50) Chief Financial and Administrative Officer Director
Colobaugh Pond Road for Marymount College, Tarrytown, New York
Croton-on-Hudson, NY 10520 since 1996. Prior thereto, he served in a
number of senior management positions at
Prudential Securities Inc.from 1983-1996.
Mr. Hertl spent ten (10) years at Arthur
Andersen & Co. and is a Certified Public
Accountant.
------------------------------------------ --------------------------------------------- ---------------------------
*MICHAEL MIOLA (48) Chief Executive Officer of American Data Chief Executive Officer,
The Hauppauge Corporate Center Services, Inc. President and
150 Motor Parkway Director
Hauppauge, New York 11788
------------------------------------------ --------------------------------------------- ---------------------------
DONALD SMITH (52) President, Don Smith Realty (1971-1999). Director
Don Smith Realty Director of Avalon Capital, Inc., a
81 North Maple Avenue closed-end investment company.
Ridgewood, NJ 07450
------------------------------------------ --------------------------------------------- ---------------------------
</TABLE>
8
<PAGE>
In addition to Mr. Miola as Chief Executive Officer and President, the
other officers of the Corporation are Michael Wagner, Treasurer and James
Colantino, Secretary. Each of the officers is employed by the Administrator.
The members of the Audit Committee of the Board of Directors are Messrs.
Hertl, Smith and Abramson. Mr. Hertl acts as the chairperson of such committee.
The Audit Committee oversees the Fund's financial reporting process; reviews
audit results and recommends annually to the Company a firm of independent
certified public accountants.
Those Directors who are officers or employees of the Administrator or
its affiliates receive no remuneration from the Fund. Each disinterested
Director receives a fee from the Fund for each regular quarterly and in-person
special meeting of the Board of Directors attended. Members of the Board who are
not affiliated with the Adviser or the Administrator receive an annual fee of
$1,000 plus $500 for each Board meeting attended. The Fund will pay a pro rata
portion of the Directors' fees and expenses based on the net assets of the Fund
and the other series of the Company. In addition, each Director who is not
affiliated with the Adviser or the Administrator is reimbursed for expenses
incurred in connection with attending meetings.
The following table sets forth the compensation received by each Director
of the Company during the Fund's fiscal year ending February 29, 2000. Directors
who are interested persons of the Company, as defined by the 1940 Act, are
indicated by asterisk.
<TABLE>
<CAPTION>
---------------------------- --------------------- ------------------ -------------------- ---------------------
(1) (2) (3) (4) (5)
---------------------------- --------------------- ------------------ -------------------- ---------------------
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT ESTIMATED ANNUAL FROM FUND AND FUND
NAME OF PERSON, POSITION COMPENSATION FROM BENEFITS ACCRUED BENEFITS UPON COMPLEX PAID TO
EACH FUND(1) AS PART OF FUND RETIREMENT DIRECTORS
EXPENSES
---------------------------- --------------------- ------------------ -------------------- ---------------------
<S> <C> <C> <C> <C>
Daniel Abramson NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
Philip A. Capalongo NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
Anthony Hertl $2,000 NONE NONE $2,000
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
Donald Smith NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
*Michael Miola NONE NONE NONE NONE
Director
---------------------------- --------------------- ------------------ -------------------- ---------------------
<FN>
1. The Officers and Directors of the Fund as a group own less than 1% of all
of the Fund's equity securities.
</FN>
</TABLE>
9
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Fund is Retirement Planning Company of New
England, Inc. (the "Adviser"). The Adviser will act as such pursuant to a
written agreement which, after its initial two-year period, must be annually
re-approved by the Board of Directors. The address of the Adviser is One
Richmond Square, Providence, RI 02906.
CONTROL OF THE ADVISER
The stock of the Adviser is owned equally by Messrs. David W. Allaire and
Michael R. Laliberte.
INVESTMENT ADVISORY AGREEMENT
The Adviser acts as the investment adviser of the Fund under an Investment
Advisory Agreement which has been approved by the Board of Directors (including
a majority of the Directors who are not parties to the agreement, or interested
persons of any such party).
The Investment Advisory Agreement will terminate automatically in the event of
its assignment. In addition, the agreement is terminable at any time, without
penalty, by the Board of Directors of the Company or by vote of a majority of
the Company's outstanding voting securities on not more than 60 days' written
notice to the Adviser, and by the Adviser on 60 days' written notice to the
Company. Unless sooner terminated, the agreement shall continue in effect for
more than two years after its execution only so long as such continuance is
specifically approved at least annually by either the Board of Directors or by a
vote of a majority of the outstanding shares of the Company, provided that in
either event such continuance is also approved by a vote of a majority of the
Directors who are not parties to such agreement, or interested persons of such
parties, cast in person at a meeting called for the purpose of voting on such
approval.
Pursuant to its Investment Advisory Agreement, the Fund will pay the Adviser
monthly an advisory fee equal, on an annual basis, to 1.00% of its average daily
net assets. The investment adviser has contractually agreed to waive some or all
of its advisory fees and reimburse some or all of the Fund's other expenses,
other than extraordinary or non-recurring expenses, so that the expense ratio of
the Fund does not exceed 2.75% of its average net assets. This arrangement will
remain in effect until at least February 28, 2001.
10
<PAGE>
Under the Investment Advisory Agreement, the Adviser provides the Fund with
advice and assistance in the selection and disposition of the Fund's
investments. All investment decisions are subject to review by the Board of
Directors of the Company. The Adviser is obligated to pay the salaries and fees
of any affiliates of the Adviser serving as officers of the Company or the Fund.
The same security may be suitable for the Fund or other private accounts managed
by the Adviser. If and when the Fund or two or more accounts simultaneously
purchase or sell the same security, the transactions will be allocated as to
price and amount in accordance with arrangements equitable to the Fund or
account. The simultaneous purchase or sale of the same securities by the Fund
and other accounts may have a detrimental effect on the Fund, as this may affect
the price paid or received by the Fund or the size of the position obtainable or
able to be sold by the Fund.
ADMINISTRATOR
The Administrator for the Fund is American Data Services, Inc. (the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds through its offices in New
York, Denver and Los Angeles.
Pursuant to an Administrative Service Agreement with the Fund, the Administrator
provides all administrative services necessary for the Fund, subject to the
supervision of the Board of Directors. The Administrator will provide persons to
serve as officers of the Fund. Such officers may be directors, officers or
employees of the Administrator or its affiliates.
The Administrative Service Agreement is terminable by the Board of Directors of
the Fund or the Administrator on sixty days' written notice and may be assigned
provided the non-assigning party provides prior written consent. The Agreement
shall remain in effect for two years from the date of its initial approval, and
subject to annual approval of the Board of Directors for one-year periods
thereafter. The Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Administrator or reckless
disregard of its obligations thereunder, the Administrator shall not be liable
for any action or failure to act in accordance with its duties thereunder.
Under the Administrative Service Agreement, the Administrator provides all
administrative services, including, without limitation: (i) provides services of
persons competent to perform such administrative and clerical functions as are
necessary to provide effective administration of the Fund; (ii) overseeing the
performance of administrative and professional services to the Fund by others,
including the Fund's Custodian; (iii) preparing, but not paying for, the
periodic updating of the Fund's Registration Statement, Prospectus and Statement
11
<PAGE>
of Additional Information in conjunction with Fund counsel, including the
printing of such documents for the purpose of filings with the Securities and
Exchange Commission and state securities administrators, preparing the Fund's
tax returns, and preparing reports to the Fund's shareholders and the Securities
and Exchange Commission; (iv) preparing in conjunction with Fund counsel, but
not paying for, all filings under the securities or "Blue Sky" laws of such
states or countries as are designated by the Distributor, which may be required
to register or qualify, or continue the registration or qualification, of the
Fund and/or its shares under such laws; (v) preparing notices and agendas for
meetings of the Board of Directors and minutes of such meetings in all matters
required by the 1940 Act to be acted upon by the Board; and (vi) monitoring
daily and periodic compliance with respect to all requirements and restrictions
of the Investment Company Act, the Internal Revenue Code and the Prospectus.
The Administrator, pursuant to the Fund Accounting Service Agreement, provides
the Fund with all accounting services, including, without limitation: (i) daily
computation of net asset value; (ii) maintenance of security ledgers and books
and records as required by the Investment Company Act; (iii) production of the
Fund's listing of portfolio securities and general ledger reports; (iv)
reconciliation of accounting records; (v) calculation of yield and total return
for the Fund; (vi) maintaining certain books and records described in Rule 31a-1
under the 1940 Act, and reconciling account information and balances among the
Fund's Custodian and Adviser; and (vii) monitoring and evaluating daily income
and expense accruals, and sales and redemptions of shares of the Fund.
ADMINISTRATOR'S FEES
For the services rendered to the Fund by the Administrator, the Fund pays the
Administrator a monthly fee based on the Fund's average net assets. The Fund
also pays the Administrator for any out-of-pocket expenses. These fees are set
forth in the Fund's Prospectus.
In return for providing the Fund with all accounting related services, the Fund
pays the Administrator a monthly fee based on the Fund's average net assets,
plus any out-of-pocket expenses for such services.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Firstar Bank, N.A. serves as custodian for the Fund's cash and securities.
Pursuant to a Custodian Agreement, it is responsible for maintaining the books
and records of the Fund's portfolio securities and cash. The Custodian does not
assist in, and is not responsible for, investment decisions involving assets of
the Fund. American Data Services, Inc., the Administrator, also acts as the
Fund's transfer and dividend disbursing agent.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement, AmeriMutual Funds Distributors, Inc. (the
"Distributor") has agreed to act as the principal underwriter for the Fund in
the sale and distribution to the public of shares of the Fund, either through
dealers or otherwise. The Distributor has agreed to offer such shares for sale
at all times when such shares are available for sale and may lawfully be offered
for sale and sold.
12
<PAGE>
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
The Fund has adopted a Distribution and Service Plan (the "Plan") that allows
the Fund to pay distribution fees for the sale and distribution of its shares
which was reviewed and approved by a majority of the disinterested directors of
the Fund, pursuant to Rule 12b-1 under the Act (the "Rule"). The Rule provides
that an investment company which bears any direct or indirect expense of
distributing its shares must do so only in accordance with a plan permitted by
the Rule. The Plan provides that the Fund will reimburse the Distributor for
certain expenses and costs incurred in connection with providing marketing and
promotional support to the Fund, shareholder servicing and maintaining
shareholder accounts, to compensate parties with which it has written agreements
and whose clients own shares of the Fund for providing servicing to their
clients ("shareholder servicing") and financial institutions with which it has
written agreements and whose clients are Fund shareholders (each a
"broker-dealer") for providing distribution assistance and promotional support
to the Fund, which reimbursement is subject to a maximum of 0.50% per annum of
the Fund's average daily net assets. Fees paid under the Plan may not be waived
for individual shareholders.
Each shareholder servicing agent and broker-dealer will, as agent for its
customers, among other things: answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Fund may be effected and certain other matters pertaining to the Fund;
assist shareholders in designating and changing dividend options, account
designations and addresses; provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder designated accounts;
furnish quarterly and year-end statements and confirmations within five business
days after activity in the account; transmit to shareholders of the Fund proxy
statements, annual reports, updated prospectuses and other communications;
receive, tabulate and transmit proxies executed by shareholders with respect to
meetings of shareholders of the Fund; and provide such other related services as
the Fund or a shareholder may request.
The Plan, the shareholder servicing agreements and the form of distribution
agreement each provide that the Adviser or the Distributor may make payments
from time to time from their own resources which may include the advisory fee
and the asset based sales charges and past profits for the following purposes:
(i) to defray the costs of and to compensate others, including financial
intermediaries with whom the Distributor has entered into written agreements,
for performing shareholder servicing and related administrative functions of the
Fund; to compensate certain financial intermediaries for providing assistance in
distributing Fund shares; (ii) to pay the costs of printing and distributing the
Fund's prospectus to prospective investors; and (iii) to defray the cost of the
preparation and printing of brochures and other promotional materials, mailings
to prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor will determine the amount
of such payments made pursuant to the Plan with the shareholder servicing agents
and broker-dealers with whom it has contracted, provided that such payments made
pursuant to the Plan will not increase the amount which the Fund is required to
pay the Distributor for any fiscal year under the shareholder servicing
agreements or otherwise.
13
<PAGE>
Shareholder servicing agents and broker-dealers may charge investors a fee in
connection with their use of specialized purchase and redemption procedures
offered to investors by the shareholder servicing agents and broker-dealers. In
addition, shareholder servicing agents and broker-dealers offering purchase and
redemption procedures similar to those offered to shareholders who invest in the
fund directly may impose charges, limitations, minimums and restrictions in
addition to or different from those applicable to shareholders who invest in the
Fund directly. Accordingly, the net yield to investors who invest through
shareholder servicing agents and broker-dealers may be less than realized by
investing in the Fund directly. An investor should read the Prospectus in
conjunction with the materials provided by the shareholder servicing agent and
broker-dealer describing the procedures under which Fund shares may be purchased
and redeemed through the shareholder servicing agent and broker-dealer.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into by the Fund, the Distributor or the Adviser,
and the shareholder servicing agents, broker-dealers, or other organizations,
must be in a form satisfactory to the Board of Directors. In addition, the Plan
requires the Fund and the Distributor to prepare, at least quarterly, written
reports setting forth all amounts expended for distribution purposes by the Fund
and the Distributor pursuant to the Plan and identifying the distribution
activities for which those expenditures were made for review by the Board of
Directors.
The following is a table showing all commissions and other compensation received
by the Distributor for the Fund's fiscal year ended February 29, 2000.
<TABLE>
<CAPTION>
---------------------------- ----------------- ------------------ ----------------- ----------------------
(1) (2) (3) (4) (5)
---------------------------- ----------------- ------------------ ----------------- ----------------------
NET
NAME OF PRINCIPAL UNDERWRITING COMPENSATION ON BROKERAGE OTHER COMPENSATION
UNDERWRITER DISCOUNTS AND REDEMPTIONS AND COMMISSIONS
COMMISSIONS REPURCHASES
---------------------------- ----------------- ------------------ ----------------- ----------------------
<S> <C> <C> <C> <C>
AMERIMUTUAL FUNDS $1,961.00 None None $1,961.00
DISTRIBUTORS, INC.
---------------------------- ----------------- ------------------ ----------------- ----------------------
</TABLE>
OTHER EXPENSES
The Fund pays certain operating expenses that are not assumed by the Adviser,
the Administrator or any of their respective affiliates. These expenses,
together with fees paid to the Adviser, the Administrator, the Distributor and
the Transfer Agent, are deducted from income of the Fund before dividends are
paid. These expenses include, but are not limited to, organizational costs, fees
and expenses of officers and Directors who are not affiliated with the Adviser,
the Administrator or any of their respective affiliates, taxes, interest, legal
fees, custodian fees, audit fees, brokerage fees and commissions, fees and
expenses of registering and qualifying the Fund and its shares for distribution
under federal and state securities laws, the expenses of reports to
shareholders, shareholders' meetings and proxy solicitations.
14
<PAGE>
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
The Fund's assets are invested by the Adviser in a manner consistent with its
investment objectives, policies, and restrictions and with any instructions the
Board of Directors may issue from time to time. Within this framework, the
Adviser is responsible for making all determinations as to the purchase and sale
of portfolio securities and for taking all steps necessary to implement
securities transactions on behalf of the Fund.
U.S. Government securities generally are traded in the over-the-counter market
through broker-dealers. A broker-dealer is a securities firm or bank that makes
a market for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.
In placing orders for the purchase and sale of portfolio securities for the
Fund, the Adviser will use its best efforts to obtain the best possible price
and execution and will otherwise place orders with broker-dealers subject to and
in accordance with any instructions the Board of Directors may issue from time
to time. The Adviser will select broker-dealers including, the Distributor, to
execute portfolio transactions on behalf of the Fund primarily on the basis of
best price and execution.
When consistent with the objectives of prompt execution and favorable net price,
business may be placed with broker-dealers who furnish investment research or
services to the Adviser. Such research or services include advice, both directly
and in writing, as to the value of securities; the advisability of investing in,
purchasing or selling securities; and the availability of securities, or
purchasers or sellers of securities; as well as analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts. To the extent portfolio transactions are
effected with broker-dealers who furnish research services to the Adviser, the
Adviser receives a benefit, not capable of evaluation in dollar amounts, without
providing any direct monetary benefit to the Fund from these transactions. The
Adviser believes that most research services obtained by it generally benefit
several or all of the investment companies and private accounts which it
manages, as opposed to solely benefitting one specific managed fund or account.
Transactions on U.S. stock exchanges, commodities markets and futures markets
and other agency transactions involve the payment by the Fund of negotiated
brokerage commissions. Such commissions vary among different brokers. A
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign investments
often involve the payment of fixed brokerage commissions, which may be higher
than those in the United States. There is generally no stated commission in the
case of securities traded in the over-the-counter markets, but the price paid by
the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
15
<PAGE>
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive brokerage and research services (as defined in the Securities Exchange
Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from third parties
with which such broker-dealers have arrangements. Consistent with this practice,
the Adviser may receive brokerage and research services and other similar
services from many broker-dealers with which the Adviser may place the Fund's
portfolio transactions and from third parties with which these broker-dealers
have arrangements. These services include such matters as general economic and
market reviews, industry and company reviews, evaluations of investments,
recommendations as to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news services and personal
computers utilized by the Adviser. Where the services referred to above are not
used exclusively by the Adviser for research purposes, the Adviser, based upon
its own allocations of expected use, bears that portion of the cost of these
services which directly relates to their non-research use. Some of these
services are of value to the Adviser and its affiliates in advising various of
their clients (including the Fund), although not all of these services are
necessarily useful and of value in managing the Fund. The management fee paid by
the Fund is not reduced because the Adviser and its affiliates receive these
services even though the Adviser might otherwise be required to purchase some of
these services for cash.
As permitted by Section 28(e) of the 1934 Act, the Adviser may cause the Fund to
pay a broker-dealer which provides "brokerage and research services" (as defined
in the 1934 Act) to the Adviser an amount of disclosed commission for effecting
securities transactions on stock exchanges and other transactions for the Fund
on an agency basis in excess of the commission which another broker-dealer would
have charged for effecting that transaction. The Adviser's authority to cause
the Fund to pay any such greater commissions is also subject to such policies as
the Directors may adopt from time to time. The Adviser does not currently intend
to cause any Fund to make such payments. It is the position of the staff of the
Securities and Exchange Commission that Section 28(e) does not apply to the
payment of such greater commissions in "principal" transactions. Accordingly,
the Adviser will use its best effort to obtain the most favorable price and
execution available with respect to such transactions, as described above.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Directors may determine, the Adviser
may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
TAXATION
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). By
so qualifying, the Fund will not incur federal income or state taxes on its net
investment income and on net realized capital gains to the extent distributed as
dividends to shareholders.
16
<PAGE>
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, the Fund must distribute during each calendar year
an amount equal to the sum of (a) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (b) at
least 98% of its capital gains in excess of capital losses (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31st of the
calendar year, and (c) all ordinary income and capital gains for previous years
that were not distributed during such years.
Under the Code, dividends derived from interest, and any short-term capital
gains, are taxable to shareholders as ordinary income for federal and state tax
purposes, regardless of whether such dividends are taken in cash or reinvested
in additional shares. Distributions made from the Fund's net realized long-term
capital gains (if any) and designated as capital gain dividends are taxable to
shareholders as long-term capital gains, regardless of the length of time Fund
shares are held. Corporate investors are not eligible for the dividends-received
deduction with respect to distributions derived from interest on short-or
long-term capital gains from the Fund but may be entitled to such a deduction in
respect to distributions attributable to dividends received by the Fund. A
distribution will be treated as paid on December 31st of a calendar year if it
is declared by the Fund in October, November or December of the year with a
record date in such a month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year
the distributions are declared, rather than the calendar year in which the
distributions are received.
Distributions paid by the Fund from net long-term capital gains (excess of
long-term capital gains over long-term capital losses), if any, whether received
in cash or reinvested in additional shares, are taxable as long-term capital
gains, regardless of the length of time you have owned shares in the Fund.
Distributions paid by the Fund from net short-term capital gains (excess of
short-term capital gains over short-term capital losses), if any, whether
received in cash or reinvested in additional shares are taxable as ordinary
income. Capital gains distributions are made when the Fund realizes net capital
gains on sales of portfolio securities during the year. Realized capital gains
are not expected to be a significant or predictable part of the Fund's
investment return.
Any redemption of the Fund shares is a taxable event and may result in a capital
gain or loss. A capital gain or loss may be realized from an ordinary redemption
of shares.
Dividend distributions, capital gains distributions, and capital gains or losses
from redemptions and exchanges may also be subject to state and local taxes.
Ordinarily, distributions and redemption proceeds paid to Fund shareholders are
not subject to withholding of federal income tax. However, 31% of the Fund's
distributions and redemption proceeds must be withheld if a Fund shareholder
fails to supply the Fund or its agent with such shareholder's taxpayer
identification number or if the Fund shareholder who is otherwise exempt from
withholding fails to properly document such shareholder's status as an exempt
recipient.
17
<PAGE>
The information above is only a summary of some of the tax considerations
generally affecting the Fund and its shareholders. No attempt has been made to
discuss individual tax consequences. To determine whether the Fund is a suitable
investment based on his or her tax situation, a prospective investor may wish to
consult a tax advisor.
OWNERSHIP OF SHARES
The Fund has only one class of shares. Each share has one vote in the election
of Directors. Cumulative voting is not authorized. This means that the holders
of more than 50% of the shares voting for the election of Directors can elect
100% of the Directors if they choose to do so, and, in that event, the holders
of the remaining shares will be unable to elect any Directors.
PURCHASE OF SHARES
Shares of the Fund may be purchased at the net asset value per share next
determined, plus any applicable sales load, after receipt of an order by the
Fund's Transfer Agent in proper form with accompanying check or other bank wire
payment arrangements satisfactory to the Fund. Fund shares are sold subject to
an initial sales load of up to 4.75%. The Fund's minimum initial investment is
$2,000 (except for retirement accounts for which the minimum initial investment
is $1,000) and the minimum subsequent investment is $100.
DIVIDENDS AND DISTRIBUTIONS
Net investment income, if any, is declared as dividends and paid annually.
Substantially all the realized net capital gains for the Fund, if any, are also
declared and paid on an annual basis. Dividends and distributions are payable to
shareholders of record at the time of declaration.
Distributions are automatically reinvested in additional Fund shares unless the
shareholder has elected to have them paid in cash.
The net investment income of the Fund for each business day is determined
immediately prior to the determination of net asset value. Net investment income
for other days is determined at the time net asset value is determined on the
prior business day. See "Purchase of Shares" and "Redemption of Shares" in the
Prospectus.
18
<PAGE>
NET ASSET VALUE
The method for determining the Fund's net asset value is summarized in the
Prospectus. The net asset value of the Fund's shares is determined on each day
on which the New York Stock Exchange is open, provided that the net asset value
need not be determined on days when no Fund shares are tendered for redemption
and no order for Fund shares is received. The Fund's net asset value is
determined by taking the market value of all securities owned by the Fund (plus
all other assets such as cash), subtracting all liabilities and then dividing
the result (net assets) by the number of shares outstanding. The Fund values
securities for which market quotations are readily available at current market
value. If market quotations are not readily available, then securities are
valued at fair value, as determined by the Board The New York Stock Exchange is
not open for business on the following holidays (or on the nearest Monday or
Friday if the holiday falls on a weekend): New Year's Day, Martin Luther King
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
PERFORMANCE COMPARISONS
Total return quoted in advertising and sales literature reflects all aspects of
the Fund's return, including the effect of reinvesting dividends and capital
gain distributions and any change in the Fund's net asset value during the
period.
The Fund's total return must be displayed in any advertisement containing the
Fund's yield. Total return is the average annual total return for the 1-, 5- and
10-year period ended on the date of the most recent balance sheet included in
the Statement of Additional Information, computed by finding the average annual
compounded rates of return over 1-, 5- and 10-year periods that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
P(1 + T)n = ERV
Where:
P = a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1000 payment made at
the beginning of the 1-, 5- or
10-year periods at the end of the
1-, 5-or 10-year periods (or
fractions thereof).
19
<PAGE>
Because the Fund has not had a registration in effect for 1, 5 or 10 years, the
period during which the registration has been effective shall be substituted.
Average annual total return is calculated by determining the growth or decline
in value of a hypothetical historical investment in the Fund over a stated
period and then calculating the annual compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual total return of 7.18%, which is
the steady annual rate that would result in 100% growth on a compounded basis in
10 years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Fund's performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Performance information may be quoted numerically or in a table, graph,
or similar illustration.
The Fund's performance may be compared with the performance of other funds with
comparable investment objectives, tracked by fund rating services or with other
indexes of market performance. Sources of economic data that may be considered
in making such comparisons may include, but are not limited to, rankings of any
mutual fund or mutual fund category tracked by Lipper Analytical Services, Inc.
or Morningstar, Inc.; data provided by the Investment Company Institute; major
indexes of stock market performance; and indexes and historical data supplied by
major securities brokerage or investment advisory firms. The Fund may also
utilize reprints from newspapers and magazines furnished by third parties to
illustrate historical performance.
The agencies listed below measure performance based on their own criteria rather
than on the standardized performance measures described in the preceding
section.
Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance
calculated by Lipper, generally reflecting changes in net asset value
adjusted for reinvestment of capital gains and income dividends. They
do not reflect deduction of any sales charges. Lipper rankings cover
a variety of performance periods, including year-to-date, 1-year,
5-year, and 10-year performance. Lipper classifies mutual funds by
investment objective and asset category.
20
<PAGE>
Morningstar, Inc. distributes mutual fund ratings twice a month. The
ratings are divided into five groups: highest, above average,
neutral, below average and lowest. They represent the fund's
historical risk/reward ratio relative to other funds in its broad
investment class as determined by Morningstar, Inc. Morningstar
ratings cover a variety of performance periods, including 1-year,
3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average assessment of the
fund's 1-year, 3-year, 5-year, and 10-year total return performance
(if available) reflecting deduction of expenses and sales charges.
Performance is adjusted using quantitative techniques to reflect the
risk profile of the fund. The ratings are derived from a purely
quantitative system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard & Poor's and
Moody's Investor Service, Inc. CDA/Weisenberger's Management Results
publishes mutual fund rankings and is distributed monthly. The
rankings are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year
and 10-year. Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum
capital gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.
Independent publications may also evaluate the Fund's performance. The Fund may
from time to time refer to results published in various periodicals, including
Barrons, Financial World, Forbes, Fortune, Investor's Business Daily,
Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The
Wall Street Journal.
Independent, unmanaged indexes, such as those listed below, may be used to
present a comparative benchmark of the Fund's performance. The performance
figures of an index reflect changes in market prices, reinvestment of all
dividend and interest payments and, where applicable, deduction of foreign
withholding taxes, and do not take into account brokerage commissions or other
costs. Because the Fund is a managed portfolio, the securities it owns will not
match those in an index. Securities in an index may change from time to time.
The Dow Jones Industrial Average is an index of 30 common stocks
frequently used as a general measure of stock market performance.
The NASDAQ Industrial Average is an index of stocks traded in The
Nasdaq Stock Market, Inc. National Market System.
Standard & Poor's 500 Composite Stock Price Index is an index of
common stocks frequently used as a general measure of stock market
performance.
21
<PAGE>
REDEMPTION OF SHARES
Redemption of shares, or payment for redemptions, may be suspended at times (a)
when the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (b) when trading on said Exchange is restricted, (c) when an
emergency exists, as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable, or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or (d) during any other
period when the Securities and Exchange Commission, by order, so permits,
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
Shareholders who purchased shares through a broker-dealer may also redeem such
shares by written request to the Transfer Agent which shares are held by the
Transfer Agent at the address set forth in the Prospectus. To be considered in
"good order", written requests for redemption should indicate the dollar amount
or number of shares to be redeemed, refer to the shareholder's Fund account
number, including either the social security or tax identification number. The
request should be signed in exactly the same way the account is registered. If
there is more than one owner of the shares, all owners must sign. If shares to
be redeemed have a value of $5,000 or more or redemption proceeds are to be paid
by someone other than the shareholder at the shareholder's address of record,
the signature(s) must be guaranteed by an "eligible guarantor institution,"
which includes a commercial bank that is a member of the Federal Deposit
Insurance Corporation, a trust company, a member firm of a domestic stock
exchange, a savings association or a credit union that is authorized by its
charter to provide a signature guarantee. The Transfer Agent may reject
redemption instructions if the guarantor is neither a member of nor a
participant in a signature guarantee program. Signature guarantees by notaries
public are not acceptable. The purpose of a signature guarantee is to protect
shareholders against the possibility of fraud. Further documentation will be
requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by facsimile
will not be accepted. Unless other instructions are given in proper form, a
check for the proceeds of the redemption will be sent to the shareholder's
address of record. Share purchases and redemptions are governed by Maryland law.
COUNSEL AND INDEPENDENT AUDITORS
Legal matters in connection with the issuance of shares of common stock of the
Fund are passed upon by Spitzer & Feldman P.C., 405 Park Avenue, New York, New
York 10022. McCurdy & Associates, CPAs, Inc., 27955 Clemens Road, Westlake, Ohio
44145, have been selected as independent auditors for the Fund.
22
<PAGE>
ORGANIZATION OF COMPANY
The Imperial Financial Services Fund, an open-end management investment company,
is a series of Questar Funds, Inc., a Maryland corporation organized on February
13, 1998.
FINANCIAL STATEMENTS
The financial statements of the Fund for the year ended February 29, 2000 are
incorporated by reference to the Fund's Annual Report, filed electronically with
the SEC on May 11, 2000. These financial statements include the schedules of
investments, statements of assets and liabilities, statements of operations,
statement of changes in net assets, financial highlights, notes and the report
of the independent auditors, McCurdy & Associates CPAs, Inc.
23
<PAGE>
APPENDIX
SECURITY RATINGS
The following rating services describe rated securities as follows:
MOODY'S INVESTORS SERVICE, INC.
BONDS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
-i-
<PAGE>
BA--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
STANDARD & POOR'S
BONDS
AAA--Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A--Debt rated 'A' has a strong capacity to pay interest and repay principal
although somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB-B-CCC-CC-C--Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. 'BB'
indicates the lowest degree of speculation and 'C' the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
-ii-
<PAGE>
BB--Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B--Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.
CCC--Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
DUFF & PHELPS CORPORATION
LONG-TERM DEBT
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A, A-Protection factors are average but adequate. However, risk factors are
more variable and greater in periods of economic stress.
-iii-
<PAGE>
BBB+, BBB, BBB--Below-average protection factors but still considered sufficient
for prudent investment. Considerable variability in risk during economic cycles.
BB+, BB, BB-Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions or company fortunes. Overall quality may move up or down
frequently within this category.
B+, B, B-Below investment grade and possessing risk that obligations will not be
met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher or
lower rating grade.
CCC--Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
-iv-
<PAGE>
PART C
ITEM 23.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
--------------------------- ---------------------------------------------------
Articles of Incorporation (See Note 1)
(a)
(b) Bylaws (See Note 1)
(c) Not Applicable.
(d)(1) Investment Advisory Agreement (Imperial Financial Services
Fund) (See Note 2)
(d)(2) Form of Investment Advisory Agreement (Aii Aggressive Trading
Fund) (See Note 2)
(d)(3) Form of Investment Advisory Agreement (MacroTrends Fund;
Pheonix Management Fund; and
Kaminski Poland Fund)(See Note 3)
(e) Form of Distribution Agreement (See Note 2)
(f) Not Applicable.
(g) Form of Custody Agreement (See Note 4)
(h) Administrative Service Agreement (Imperial Financial Services
Fund) (Aii Aggressive Trading Fund (See Note 2)
(h)(1) Form of Administrative Service Agreement (MacroTrends Fund;
Pheonix Management Fund; Kaminski Poland Fund) (See Note 4)
(h)(2) Form of Transfer Agency Agreement (See Note 2)
(i) Opinion of Spitzer & Feldman P.C. as to the legality of the
securities being registered, including their consent to the
filing thereof and as to the use of their names in the
Prospectus (Imperial Financial Services Fund)(See Note 1)
(i)(1) Consent of Spitzer & Feldman P.C. (Aii Aggressive Trading Fund)
(See Note 2)
(i)(2) Consent of Spitzer & Feldman P.C. (MacroTrends Fund)
(See Note 3)
(i)(3) Consent of Spitzer & Feldman P.C. (Pheonix Manqgement Fund)
(See Note 3)
(i)(4) Consent of Spitzer & Feldman P.C. (Kaminski Poland Fund)
(See Note 3)
(j) Consent of McCurdy & Associates, CPAs, Inc., independent
auditors (Imperial Financial
Services Fund) (See Note 2)
(j)(1) Consent of McCurdy & Associates (Aii Aggressive Trading Fund)
(See Note 3)
(j)(2) Consent of McCurdy & Associates (MacroTrends Fund)(See Note 3)
(j)(3) Consent of McCurdy & Associates (Pheonix Management Fund)
(See Note 3)
(j)(4) Consent of McCurdy & Associates (Kaminski Poland Fund))
(See Note 3)
(k) Not Applicable.
(l) Subscription Letter (See Note 2)
(m) Distribution (12b-1) Plan (Imperial Financial Services Fund)
(See Note 2)
(m)(1) Distribution (12b-1) Plan ((Aii Agressive Trading Fund)
(See Note 2)
(m)(2) Distribution (12b-1) Plan (MacroTrends Fund; Pheonix
Management Fund; and Kaminski Poland Fund)(See Note 4)
(n) Not Applicable.
(n) Rule 18f-3 Plan (See Note 4)
Other Exhibits Not Applicable
C0
<PAGE>
Notes to Exhibits:
(1) Filed with the Securities and Exchange Commission as an Exhibit to the
Registrant's Registration Statement (Reg. No. 333-46323) on February 13,
1998.
(2) Filed with the Securities and Exchange Commission as an Exhibit to
Pre-Effective Amendment No. 2 to the Registration Statement (Reg. No.
333-46323) on January 25, 1999.
(3) Filed with the Securities and Exchange Commission as an Exhibit to
Post-Effective Amendment No. 4 to the Registration Statement (Reg. No.
333-46323) on December 10, 1999.
(4) To Be Filed by Future Amendment
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable
ITEM 25. INDEMNIFICATION.
(a) In accordance with Section 2-418 of the General Corporation
Law of the State of Maryland, Article NINTH of the Registrant's
Articles of Incorporation provides as follows:
"NINTH:(1) The Corporation shall indemnify (i) its currently
acting and former directors and officers, whether serving the
Corporation or at its request any other entity, to the fullest
extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of
expenses under the procedures and to the fullest extent permitted
by law, and (ii) other employees and agents to such extent as
shall be authorized by the Board of Directors or the By-Laws and
as permitted by law. Nothing contained herein shall be construed
to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. The foregoing rights of
indemnification shall not be exclusive of any other rights to
which those seeking indemnification may be entitled. The Board of
Directors may take such action as is necessary to carry out these
indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such by-laws, resolutions or
contracts implementing such provisions or such indemnification
arrangements as may be permitted by law. No amendment of the
charter of the Corporation or repeal of any of its provisions
shall limit or eliminate the right of indemnification provided
hereunder with respect to acts or omissions occurring prior to
such amendment or repeal.
(2) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, and the Investment
Company Act of 1940, no director or officer of the Corporation
shall be personally liable to the Corporation or its stockholders
for money damages; provided, however, that nothing herein shall
be construed to protect any director or officer of the
Corporation against any liability to the Corporation or its
C1
<PAGE>
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office. No
amendment of the charter of the Corporation or repeal of any of
its provisions shall limit or eliminate the limitation of
liability provided to directors and officers hereunder with
respect to any act or omission occurring prior to such amendment
or repeal."
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS.
(a) Retirement Planning Company of New England, Inc. serves as investment
adviser to Imperial Financial Services Fund. The description of Retirement
Planning Company of New England, Inc., under the Caption "Management - The
Adviser" and "Management - The Adviser" in the Prospectus and Statement of
Additional Information, constituting certain of Parts A and B,
respectively, of this Registration Statement, are incorporated by reference
herein.
Retirement Planning Company of New England, Inc. is: One Richmond Square,
Providence, RI 02906. The following are the directors and officers of Retirement
Planning Company of New England, Inc., including any business connections of a
substantial nature that they have had in the past two years. Unless other
indicated, the address of any other business connection is also: One Richmond
Square, Providence, RI 02906. Set forth below are the names of the directors and
officers of the Adviser:
---------------------- --------------------------------- -----------------------
NAME TITLE BUSINESS CONNECTION
---------------------- --------------------------------- -----------------------
David W. Allaire President, CEO, and Director
---------------------- --------------------------------- -----------------------
Michael R. Laliberte CFO and Director
---------------------- --------------------------------- -----------------------
(b) Pheonix Investment Management, Inc. serves as investment adviser to the
Pheonix Management Fund. The description of Pheonix Investment Management,
Inc., under the Caption "Management - The Adviser" and "Management - The
Adviser" in the Prospectus and Statement of Additional Information,
constituting certain of Parts A and B, respectively, of this Registration
Statement, are incorporated by reference herein.
The address of Pheonix Investment Management, Inc. is: 2090 Palm Beach
Lakes Blvd., Suite 700, West Palm Beach, FL 33409. The following are the
directors and officers of Pheonix Investment Management, Inc., including any
business connections of a substantial nature that they have had in the past two
years. Unless other indicated, the address of any other business connection is
also: 2090 Palm Beach Lakes Blvd., Suite 700, West Palm Beach, FL 33409. .
<TABLE>
<CAPTION>
---------------------- ---------------------------- ----------------------------------
NAME TITLE BUSINESS CONNECTION
---------------------- ---------------------------- ----------------------------------
<S> <C> <C>
Michael W. Burnick President and CEO Pheonix Investments, Inc.
---------------------- ---------------------------- ----------------------------------
Michael S. Robinson Executive Vice-president Contractors Success Group,
Brentwood, TN ; Service Experts,
Inc., Brentwood, TN
---------------------- ---------------------------- ----------------------------------
Thomas D. Abrams Director Pheonix Investments, Inc. (2/97 -
Present); Capital Research Corp.
(2/97 - 6/98)
---------------------- ---------------------------- ----------------------------------
</TABLE>
C2
<PAGE>
(c) Yale Research and Management Co., Inc., serves as investment adviser to
MacroTrends Funds. The description of Yale Research and Management Co.,
Inc., under the Caption "Management - The Adviser" and "Management - The
Advisor" in the Prospectus and Statement of additional Information,
constituting certain of Parts A and B, respectively, of this Registration
Statement, are incorporated by reference herein.
The address of YaleFunds Management and Research Co. is 3980 Howard
Hughes Parkway, Suite 400, Las Vegas, NV 89109. The following are the directors
and officers YaleFunds Management and Research Co., including any business
connections of a substantial nature that they have had in the past two years.
Unless other indicated, the address of any other business connection is also
3980 Howard Hughes Parkway, Suite 400, Las Vegas, NV 89109.
----------------- ------------------ --------------------------------------
NAME TITLE BUSINESS CONNECTION
----------------- ------------------ --------------------------------------
Yi Yale Wang President American Fronteer Financial Corp.
3800 Paradise Road, Las Begas, NV
89109 (3/98 - 8/99);
Presidential Brokerage, Inc. 3753
Howard Hughes Pkwy, Las Vegas, NV
89109 (3/97 - 3/98)
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The principal underwriter of the Company's shares, AmeriMutual
Funds Distributors, Inc., currently acts as a principal underwriter,
depositor or investment adviser for the following other investment
companies:
iMillennium Capital Trust
AmeriMutual Funds Distributors, Inc., is registered with the Securities
and Exchange Commission as a broker-dealer and is a member of the
National Association of Securities Dealers. AmeriMutual Funds
Distributors, Inc., is an indirect wholly-owned subsidiary of Orbitex
Financial Services Group, Inc.
(b) The following table contains information with respect to each
director, officer or partner AmeriMutual Funds Distributors, Inc.,.:
C3
<PAGE>
<TABLE>
<CAPTION>
----------------------------- -------------------------------- ------------------------------
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
BUSINESS ADDRESS* UNDERWRITER REGISTRANT
----------------------------- -------------------------------- ------------------------------
<S> <C> <C>
Christopher Klutch Director, President, CEO None
----------------------------- -------------------------------- ------------------------------
Vali Nasr General Principal, Financial None
and Operations Principal
----------------------------- -------------------------------- ------------------------------
Nathan O'Steen Vice President, General None
Principal, Chief Compliance
Officer
----------------------------- -------------------------------- -----------------------------
Richard E. Stierwalt Director, Chief Operations None
Officer
----------------------------- -------------------------------- ------------------------------
<FN>
* Unless otherwise indicated, all addresses are: The Hauppauge
Corporate Center, 150 Motor Parkway, Hauppauge, NY 11788
</FN>
</TABLE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Company required to be maintained by Section
31(a) of the 1940 Act and the rules promulgated thereunder are located, in whole
or in part, at the office of the Administrator, American Data Services, Inc.,
The Hauppauge Corporate Center, 150 Motor Parkway, Hauppauge, New York 11788 and
custodial records which are maintained at the offices of the Custodian for the
Imperial Financial Services Fund at Firstar Bank, N.A. at 615 East Michigan
Street, Milwaukee, Wisconsin 53202 and at the offices of the Custodian for
MacroTrends Fund and Phoenix Management Fund at Union Bank of California, N.A.
at 350 California Street, San Francisco California 94104.
ITEM 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. UNDERTAKINGS.
Not applicable.
C4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Hauppauge and State of New York, on the 27th day of June, 2000.
QUESTAR FUNDS, INC.
By:/S/ MICHAEL MIOLA
--------------------
Michael Miola, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
/S/ MICHAEL MIOLA Director, Chairman of the June 27, 2000
----------------- Board and Chief Executive Officer June 27, 2000
Michael Miola
/S/ DANIEL ABRAMSON Director
-------------------
Daniel Abramson
/S/ PHILIP CAPALONGO Director June 27, 2000
--------------------
Philip Capalongo
/S/ ANTHONY HERTL Director June 27, 2000
-----------------
Anthony Hertl
/S/ DONALD SMITH Director June 27, 2000
----------------
Donald Smith
The above persons signing as Directors are all of the members of the Company's
Board of Directors.
--------
